China's June Factory Activity, Services Slow Anew

China's manufacturing activity fell for a second month in June, while services activity slipped to a five-month low, an official survey showed keeping alive calls for further stimulus as the economy struggles to get back on its feet, Joe Cash and Ellen Zhang reported for Reuters.

Indexes of new orders, raw material stocks, employment, supplier delivery times, and new export orders were all in contractionary territory.

The National Bureau of Statistics (NBS) purchasing managers' index (PMI), at 49.5 in June, was unchanged from May, below the 50-mark separating growth from contraction and in line with a median forecast of 49.5 in a Reuters poll.

“Actual industrial activity should be stronger than the data suggests as our observation is that the official PMI fails to fully capture the current export momentum, which has been the major economic driver this year," said Xu Tianchen, senior economist at the Economist Intelligence Unit.

Still, Xu added that external and domestic demand remains relatively inadequate to absorb China's manufacturing capacity, and this will prevent a recovery in producer prices.

While a sub-index of production was above 50 in June, other indexes of new orders, raw material stocks, employment, supplier delivery times, and new export orders were all in contractionary territory, the NBS survey showed.

China's exports exceeded forecasts in May, but analysts said the jury is still out on whether export sales are sustainable given the growing trade tension between Beijing and Western economies.

Meanwhile, a protracted property crisis continues to drag on domestic demand.