China’s July manufacturing activity contracts more than expected

BEIJING — China’s official gauge for manufacturing activity on Thursday pointed to a worse-than-expected contraction in July amid slower economic growth and ongoing U.S. trade tensions.

The Manufacturing Purchasing Managers’ Index for July was 49.3, missing expectations for 49.7 according to a Reuters poll.

China’s official manufacturing PMI has been below the 50 mark, reflecting contraction rather than expansion, since April.

U.S.-China tensions escalated in April with each side imposing tariffs of more than 100% on imports of goods from the other. The two sides agreed in May to roll back most of the additional duties for 90 days.

The truce is set to expire in mid-August. Representatives from the world’s two largest economies ended a meeting in Stockholm this week without announcing an extension of the agreement, which had been widely expected.

Within the manufacturing PMI, sub-indexes showed that employment, new orders and raw materials inventory also contracted in July. The index for jobs ticked up to 48, from 47.9 in June.

The National Bureau of Statistics attributed the manufacturing PMI decline in July to the traditional off-season and factors such as extreme heat and torrential rain in parts of the country.

In one of the latest instances of extreme weather, at least 30 people died this week on the outskirts of Beijing after the city issued the highest-level red alert for heavy rain, according to state media.

China’s exports rose by 5.8% year on year in June, more than offsetting a drop in exports to the U.S., customs data showed earlier this month.

During a high-level Politburo meeting on Wednesday, China’s top leaders did not signal plans for substantial new stimulus, although the country has been ramping up subsidies to encourage people to have more children.

— CNBC’s Anniek Bao contributed to this report.