Economic Watch: June PMI data points to accelerating recovery of Chinese economy amid policy stimulus

China's factory and service activities continued to expand in June as a slew of supportive policies are taking effect, official data showed Tuesday.

The purchasing managers' index (PMI) for China's manufacturing sector ticked up to 50.9 in June from 50.6 in May, the National Bureau of Statistics (NBS) said.

A reading above 50 indicates expansion, while a reading below reflects contraction.

Wen Bin, chief analyst at China Minsheng Bank, attributed the growth to the positive trend in nationwide epidemic control, improvements in both supply and demand and counter-cyclical adjustment policies that are paying off.

China has been walking a fine line in balancing epidemic control and economic recovery, with targeted measures to help firms safely restart their businesses.

The PMI for 14 of the 21 surveyed manufacturing sectors registered a reading above 50, an increase of five from last month, the data showed.

The sub-index for production edged up 0.7 points to 53.9 in June. The sub-index for new orders picked up 0.5 points to 51.4, rising for two consecutive months.

The PMI for large- and medium-sized enterprises stood at 52.1 and 50.2, respectively, while that for small firms slid 1.9 points to 48.9, indicating that for the time being smaller businesses are encountering difficulties, Wen said.

As major global economies resumed business successively, external demand recovered but remained sluggish, with the sub-index measuring new export orders increasing 7.3 points to 42.6.

The indices measuring raw material purchase prices and factory-gate prices rebounded by 5.2 and 3.7 points, respectively, both reaching the highest level in the past six months.

Although the sub-index gauging firms' expectations for business activities slightly declined to 57.5, manufacturing firms remained sanguine about the market recovery in the near future, said NBS senior statistician Zhao Qinghe.

Tuesday's data also showed that the PMI for the non-manufacturing sector rose 0.8 points to 54.4 in June, growing for the fourth straight month.

In breakdown, the sub-index for business activities in the construction sector came in at 59.8, above 59 for three months in a row, and that for the service sector rose 1.1 points to 53.4.

As the restoration of production and life orders accelerated, market confidence was enhanced and demands for the service sector kept growing, according to Zhao.

Zhang Liqun, a researcher with the Development Research Center of the State Council, said the PMI expansion above the boom-bust line signals that the country's economic restoration is accelerating.

However, some service industries are still facing difficulties in recovery, as the sub-indices for business activities in culture, sports and entertainment areas are below the 50-point mark, Zhao said.

As the monetary and fiscal policies implemented earlier are taking effect, the performance of the manufacturing sector will be promising in the next half year, said Wu Chaoming, vice president of the research institute at Chasing Securities.