China’s Factory and Services Gauges Both Fall Below 50 in July
China’s manufacturing purchasing managers’ index fell to 49.2 in July from 50.3 in June, and the non-manufacturing index fell to 49.0 from 50.2, the National Bureau of Statistics reported on 31 July. The composite output index, which combines the two, stood at 49.3. It is the first month of the year in which both headline gauges sit below the 50 line that separates expansion from contraction.
The two headline gauges
| Index | July 2026 | June 2026 |
|---|---|---|
| Manufacturing PMI | 49.2 | 50.3 |
| Non-manufacturing PMI | 49.0 | 50.2 |
| Composite output | 49.3 | — |
| Services (within non-mfg) | 49.3 | 50.4 |
| Construction (within non-mfg) | 47.0 | 49.0 |
Inside manufacturing
The production sub-index slipped to 49.9 from 51.4 and new orders to 48.5 from 51.2 — the demand side weakening faster than the output side, which is the sequence that usually precedes an inventory correction. Employment came in at 49.0, up 0.5 points from June’s 48.5: still contracting, but contracting more slowly.
The sectoral picture was uneven rather than uniformly weak. Equipment manufacturing recorded 51.4 and high-technology manufacturing 53.3, both comfortably in expansion. Sub-indices for food, wine, beverages and refined tea, and for railways, shipping and aerospace equipment, exceeded 60. General equipment and computer and communication electronic equipment saw both production and new orders above 53. Production and business expectations held at 54.1, indicating that firms themselves read the month as a pause rather than a turn.
Inside services and construction
Construction is the weaker of the two non-manufacturing legs, at 47.0 against 49.0 in June, and its new orders index at 40.1 is the single lowest reading in the release. Services new orders stood at 45.2. Against that, postal services, telecommunications, broadcasting and satellite transmission, and culture, sports and entertainment all posted business activity above 55.
Huo Lihui, senior statistician at the National Bureau of Statistics, attributed the manufacturing decline to “a relatively high base from the rapid manufacturing growth in the previous period and the traditional off-season for production in some manufacturing industries.”
Why it matters: China is the largest single buyer of Gulf crude and a principal counterparty for GCC petrochemical exports. A composite reading of 49.3 signals a broad, if shallow, softening in the month rather than a manufacturing-specific dip, and construction new orders at 40.1 points to continued weakness in the property-linked demand that drives steel, aluminium and base-metal consumption. For Kuwait and its neighbours the read-across is to volumes rather than to prices in the near term.
Looking ahead: The August PMIs are due at the end of the month. Whether July was seasonal, as the statistician suggests, or the start of a broader deceleration will be visible in the new orders series first.
Sources: National Bureau of Statistics of China, July 2026 PMI releases, as reported by Xinhua and China Daily, 31 July 2026.
