Broker: UOB Kay Hian
Date of Report: Friday, 01 August 2025
China’s July PMI Stumbles: Manufacturing and Construction Slowdown Signals Fragile Economic Recovery
China’s Economic Recovery Faces Headwinds in July 2025
China’s latest Purchasing Managers’ Index (PMI) readings for July 2025 reveal a faltering economic rebound, weighed down by softer construction activity and rising input costs. Despite recent improvements, both manufacturing and non-manufacturing sectors showed signs of strain, with persistent external challenges and domestic demand weakness stalling momentum. However, business expectations have shown a modest uptick, hinting at cautious optimism for the remainder of the year.
Key July 2025 PMI Highlights
- Manufacturing PMI: Down to 49.3 (-0.4 points month-on-month), remaining in contraction after two months of modest gains.
- Non-Manufacturing PMI: Fell to 50.1 (-0.4 points), barely staying in expansion and slightly below expectations.
- Construction Activity: Declined sharply to 50.6 (-2.2 points), reflecting sustained pressure from the real estate sector.
- Input Cost Pressures: Purchase prices surged to 51.5 (+3.1 points), the highest since October 2024, signaling margin compression risks.
- Business Expectations: Improved for both sectors, with manufacturing at 52.6 (+0.6) and non-manufacturing at 55.8 (+0.2).
Manufacturing Sector: Recovery Loses Steam Amid Rising Costs
July’s manufacturing PMI retreated to 49.3, missing consensus expectations and signaling contraction. Key details include:
- Manufacturing Output: Remained in expansion at 50.5 (-0.5), but momentum slowed.
- New Orders: Dropped to 49.4 (-0.8), indicating weaker domestic and external demand.
- New Export Orders: Fell to 47.1 (-0.6), underscoring global demand headwinds.
- Purchase Prices: Jumped to 51.5 (+3.1), the highest in almost a year, reflecting significant input cost inflation.
- Outdoor Prices: Rose to 48.3 (+2.1), further pressuring margins.
- Business Expectations: Tick up to 52.6 (+0.6), suggesting some hope for future improvement.
Manufacturing PMI Detail Table
| Indicator |
Jul 25 |
MoM Chg |
Jun 25 |
May 25 |
| Manufacturing PMI |
49.3 |
-0.4 |
49.7 |
49.5 |
| Manufacturing Output |
50.5 |
-0.5 |
51.0 |
50.7 |
| New Orders |
49.4 |
-0.8 |
50.2 |
49.8 |
| Raw Material Inventory |
47.7 |
-0.3 |
48.0 |
47.4 |
| Employment |
48.0 |
+0.1 |
47.9 |
48.1 |
| Suppliers’ Delivery Time |
50.3 |
+0.1 |
50.2 |
50.0 |
| New Export Orders |
47.1 |
-0.6 |
47.7 |
47.5 |
| Imports |
47.8 |
0.0 |
47.8 |
47.1 |
| Purchases |
49.5 |
-0.7 |
50.2 |
47.6 |
| Purchase Prices |
51.5 |
+3.1 |
48.4 |
46.9 |
| Outdoor Prices |
48.3 |
+2.1 |
46.2 |
44.7 |
| Inventory of Finished Goods |
47.4 |
-0.7 |
48.1 |
46.5 |
| Backlog Orders |
44.7 |
-0.5 |
45.2 |
44.8 |
| Business Expectations |
52.6 |
+0.6 |
52.0 |
52.5 |
Non-Manufacturing and Construction: Expansion Slows, Real Estate Drags Sentiment
The non-manufacturing PMI edged down to 50.1, just above the threshold for expansion and slightly under market forecasts. The main drag came from the construction subindex, which fell sharply:
- Construction PMI: Dropped to 50.6 (-2.2), as the real estate downturn continues to exert downward pressure.
- Services PMI: Remained steady at 50.0 (-0.1), maintaining neutral ground.
- New Orders (Non-Manufacturing): Fell to 45.7 (-0.9), with export orders also declining to 48.8 (-1.0).
- Backlog Orders: Weakened further to 42.3 (-1.1), highlighting sluggish demand.
- Business Expectations (Non-Manufacturing): Rose to 55.8 (+0.2), supporting a cautiously optimistic outlook.
Non-Manufacturing PMI Detail Table
| Indicator |
Jul 25 |
MoM Chg |
Jun 25 |
May 25 |
| Non-manufacturing PMI |
50.1 |
-0.4 |
50.5 |
50.3 |
| New Orders |
45.7 |
-0.9 |
46.6 |
46.1 |
| Input Prices |
50.3 |
+0.4 |
49.9 |
48.2 |
| Selling Prices |
47.9 |
-0.9 |
48.8 |
47.3 |
| Employment |
45.6 |
+0.1 |
45.5 |
45.5 |
| Business Expectations |
55.8 |
+0.2 |
55.6 |
55.9 |
| New Export Orders |
48.8 |
-1.0 |
49.8 |
48.0 |
| Backlog Orders |
42.3 |
-1.1 |
43.4 |
43.4 |
| Inventory |
45.3 |
+0.5 |
44.8 |
46.1 |
| Suppliers’ Delivery Time |
51.2 |
0.0 |
51.2 |
51.1 |
| Construction |
50.6 |
-2.2 |
52.8 |
51.0 |
| Services |
50.0 |
-0.1 |
50.1 |
50.2 |
PMI by Enterprise Size: Mixed Results as Small Firms Remain Under Pressure
The PMI breakdown by corporate size highlights diverging trends:
- Large-Sized Enterprises: PMI slipped to 50.3 (-0.9), still marginally in expansion.
- Mid-Sized Enterprises: Improved to 49.5 (+0.9), benefiting from gradual policy support.
- Small-Sized Enterprises: Fell further to 46.4 (-0.9), with weak external demand continuing to weigh on recovery.
PMI by Corporate Size Table
| Indicator |
Jul 25 |
MoM Chg |
Jun 25 |
May 25 |
| Large-sized enterprise |
50.3 |
-0.9 |
51.2 |
50.7 |
| Mid-sized enterprise |
49.5 |
+0.9 |
48.6 |
47.5 |
| Small-sized enterprise |
46.4 |
-0.9 |
47.3 |
49.3 |
Looking Ahead: Policy Support and Anti-Involution Measures in Focus
The data for July 2025 underscores the fragility of China’s economic recovery. With manufacturers squeezed by rising costs and weak demand, and construction weighed down by property market woes, the need for targeted fiscal stimulus is clear. Medium-sized enterprises are showing some resilience, likely due to supportive policy measures, but small firms remain vulnerable.
Business expectations have brightened slightly, with hopes pinned on upcoming anti-involution measures and further government action to boost domestic demand. As China moves into the second half of 2025, the effectiveness of these policies will be critical for restoring growth momentum.
Analyst Contacts
Conclusion
China’s July PMI results send a clear message: The recovery is at risk of stalling amid mounting cost pressures, tepid demand, and ongoing real estate challenges. For investors and market watchers, close attention to upcoming policy signals and the government’s commitment to supporting both manufacturing and non-manufacturing sectors will be essential in gauging the trajectory for the world’s second-largest economy.
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