China PMI edges higher but second-quarter slowdown still likely

Key Facts

1China's purchasing managers' index rose slightly above pessimistic expectations, but it does not indicate a major turnaround in June and a second-quarter slowdown remains likely.

2Sluggish domestic demand in China could potentially prompt additional policy support, with markets focusing on the July Politburo meeting.

Amid lingering concerns over China's economic recovery, the June PMI data came in slightly above pessimistic expectations but does not signal a meaningful turnaround. According to an ING report, a second-quarter slowdown remains likely, reflecting sustained weakness in domestic demand.

The report noted that sluggish domestic demand could prompt additional policy support, with markets focusing on the upcoming July Politburo meeting. This comes amid other Chinese economic indicators pointing to a deceleration.

Investors are eyeing the July Politburo meeting for potential stimulus announcements. Absent a significant policy shift, growth headwinds are expected to persist, with structural challenges continuing to weigh on the economy.