China Factory Activity Unexpectedly Contracts

China’s official NBS Manufacturing PMI unexpectedly declined to 49.2 in July 2026 from 50.3 in the previous month, below market expectations of 50.0. It was the first contraction in factory activity since February, amid persistently weak domestic and external demand and elevated production costs. Output shrank for the first time in five months (49.9 vs 51.4 in June), while new orders contracted after expanding in the previous month (49.9 vs 51.2), with foreign orders also returning to contraction (49.0 vs 50.1). However, employment remained subdued (49.0 vs 48.4), while purchasing activity returned to contraction (49.4 vs 51.4) and supplier delivery times lengthened further (49.5 vs 49.9). On the price front, input cost inflation eased but remained elevated (53.2 vs 54.2), while output prices fell by the most in nine months (47.8 vs 48.2). Finally, business sentiment weakened slightly (54.1 vs 54.3).





