China Caixin Manufacturing PMI Rebounds Yet Jobs and Exports Show Strain; AUD/USD Slides

China’s Caixin Manufacturing PMI Rebounds in June Despite Tariffs

China’s manufacturing sector was under the spotlight for a second session on Tuesday, July 1, as US tariffs remained in effect.

The Caixin Manufacturing PMI rose from 48.3 in May to 50.4 in June, beating a consensus of 49. Crucially, the PMI climbed above the neutral 50 level, signaling a return to expansion.

The June Survey revealed the following key trends:

• Production rebounded in June after briefly declining in May, with the rate of growth the most marked since November 2024.
• Manufacturers reported stronger demand conditions, citing improving trade terms and promotions as contributory factors.
• While domestic demand rose marginally, new export orders fell for the third consecutive month.
• Employment continued to fall in June amid redundancies and resignations.
• Cost controls and uncertainty about the economic outlook left manufacturers cautious about hiring.
• Average input costs fell for the fourth month in a row on lower raw material prices, leading to a drop in average selling prices.
• Meanwhile, export charges increased because of rising logistics and shipping costs.

Expert Views on China’s Manufacturing Sector

Dr. Wang Zhe, Senior Economist at Caixin Insight Group, remarked on key trends from the June survey:

“With earlier policy measures aiming to stabilize the economy continuing to take effect, the overall operation of the economy remains stable, alongside a gradual recovery of market conditions. However, we must recognize that the external environment remains severe and complex, with increasing uncertainties. The issue of insufficient effective demand at home has yet to be fundamentally resolved.”

In terms of longer-term focus, Dr. Wang Zhe concluded,

“While some of the existing stimulus policies may have front-loaded short-term consumption, unleashing consumption potential in the long term still relies on aspects including stabilizing employment, reinforcing confidence, and increasing incomes.”

The Market Reaction to the Caixin Manufacturing PMI

The forex markets responded promptly to the PMI release.

The AUD/USD briefly climbed to a high of $0.65621 before falling to a low of $0.65534. On July 1, the AUD/USD was down 0.33% to $0.65576.

The Aussie dollar remains sensitive to Chinese economic data amid concerns about the effect of tariffs on trade terms. Australia has a trade-to-GDP ratio exceeding 50%, with China accounting for one-third of its exports. Australia’s reliance on demand from China exposes the Aussie dollar to US-China trade developments and the potential effects of tariffs on demand.

The Hang Seng Index was closed for trading.

What’s Next? US-China Trade Developments in Focus

On Thursday, July 3, China’s Caixin Services PMI numbers for June will be in focus. Following a modest manufacturing recovery, any signs of service sector weakness could fuel speculation about further stimulus measures to bolster domestic consumption. However, US-China trade headlines also need consideration after last week’s agreement to ease export restrictions.

Discover strategies to navigate this week’s market trends here.