A chip manufacture machine Photo: VCG

China's private Caixin/Markit Manufacturing Purchasing Managers' Index (PMI), an index that measures factory activity, rebounded back into the expansion territory of 51.7 in June, up 3.6 percentage points from May, and beating market expectations of 50.1.

The indicator reversed the contraction trend in the previous three months, returning to expansion territory and recording the highest reading since June 2021, according to Caixin. As for the PMI indicators, a reading above 50 indicates expansion, while below 50 reflects contraction.

Supply strengthened sharply in June and demand improved. Both the production index and the new orders index returned to expansion territory for the month, with the production index hitting its highest level since December 2020, Caixin reported.

Citing surveyed companies, the report said that the ease of the Omicron resurgence in China has led to strong consumption demand, which led to a rebound in sales. 

"The easing of regional COVID-19 lockdowns and other restrictions contributed to the recovery," said Wang Zhe, senior economist at Caixin Insight Group, in the report.

"The recovery of manufacturing demand was not as strong as that of supply, but the subindex for total new orders rose above 50 for the first time in four months, and the gauge for new export orders returned to positive territory for the first time since last July," Wang said.

Companies are gaining confidence over the prospect. 

"Business confidence regarding the 12-month outlook for output improved to a four-month high in June. Companies were generally upbeat in their forecasts as they anticipated further increases in production as the pandemic recedes and further improvements in client demand," read the report.

In the meantime, Wang warned that "the job market lagged the positive signs, remaining in negative territory. Input costs and output prices continued to diverge, posing profit challenges."

The Caixin figures generally echoed the official PMI readings released by the National Bureau of Statistics (NBS) on Thursday. Per NBS, PMI for China's manufacturing sector came in at 50.2 in June, up from 49.6 in May, while the non-manufacturing PMI in June improved to 54.7 from 47.8 in May.

"As the epidemic prevention and control situation in China continues to improve and a package of policies and measures to stabilize the economy are taking effect at a faster pace, China's overall economic recovery has picked up speed," NBS senior statistician Zhao Qinghe said.

Zhao also pointed out that although the manufacturing sector continued to recover in June, 49.3 percent of enterprises still reported insufficient orders, adding that weak market demand is still the main problem facing the manufacturing sector.

Global Times