Highlights

• July's manufacturing PMI fell to 49.2 (-1.1ppt mom), below Bloomberg's consensus of 50.1, as the new orders sub-index dropped to 48.5 (-2.7ppt mom) and the manufacturing output sub-index slipped back into contraction at 49.9 (-1.5ppt mom). The new export orders index also eased, but only to 49.6 (-0.5ppt mom), suggesting the weakness was led by domestic demand. 
   
• Non-manufacturing PMI fell to 49.0 (-1.2ppt mom), also below Bloomberg's consensus of 50.0, dragged by the construction industry index at 47.0 (-2.0ppt mom), a fresh cycle low, while the services industry index returned to contraction at 49.3 (-1.1ppt mom). 
   
• The composite indices for all three enterprise sizes fell below 50 for the first time since Nov 25. The July Politburo meeting confirmed that there will be further demand-supportive measures in 2H26.
   

What's New

• July's manufacturing PMI fell into the contractionary zone to 49.2 (-1.1ppt mom), 0.9ppt below Bloomberg's consensus of 50.1. The new orders sub-index dropped to 48.5 (-2.7ppt mom), while the manufacturing output sub index slipped back into contraction at 49.9 (-1.5ppt mom). The new export orders index also eased to 49.6 (-0.5ppt mom), but its smaller decline suggests the weakness was mainly led by domestic demand. The purchases index fell to 49.4 (-2.0ppt mom) and the imports index to 47.5 (-2.1ppt mom), pointing to more cautious input procurement, while the inventory of finished goods index rose to 48.6 (+0.9ppt mom), pointing to slower rundown of inventory. On the cost front, the purchase prices index eased to 53.2 (-1.0pt mom) but stayed expansionary, while the outdoor prices index fell further to 47.8 (-0.4pt mom), remaining in contractionary territory. With input costs still rising and output prices still falling, margin pressure persists. The employment sub-index rose to 49.0 (+0.5ppt mom), the only composite index to improve, with the business expectations index held at 54.1 (-0.2ppt mom). 
   
• Non-manufacturing PMI fell to 49.0 (-1.2pt mom), 1.0ppt below Bloomberg's consensus of 50.0. Construction industry index contracted sharply to 47.0 (-2.0ppt mom), a fresh cycle low, partly reflecting seasonal summer disruption to site activity, as seen in Jul 25 (-2.2ppt mom), but also showed continued property sector weakness. The services industry index slipped back below the threshold to 49.3 (-1.1ppt mom). The new orders sub index fell to 44.4 (-3.6ppt mom), more than reversing June's gain, while the new export orders index for services eased to 47.0 (-0.9ppt mom). The input prices sub-index held flat at 49.7 (0.0ppt mom) against a softer selling prices sub-index (47.9, -0.5ppt mom), widening the gap to 1.8ppt and pointing to renewed margin pressure. The business expectations sub-index was resilient at 55.4 (+0.1ppt mom).  
   
• Enterprise PMI weakened across the board. The large-sized enterprises composite index fell into contraction at 49.5 (-1.2pt mom), its first sub-50 reading since Nov 25 and the largest decline across firm sizes. The medium sized enterprises composite index slipped to 49.7 (-0.8pt mom), giving up June's brief return to expansion. The small-sized enterprises composite index declined to 47.4 (-0.8pt mom), still lagging the other two. 
   
• July's PMI data is a clear negative surprise, with both headline readings missing consensus and returning to contraction. The weakness was mainly led by domestic demand, as new orders sub-indices in both sectors fell sharply and the construction industry index hit a cycle low, while manufacturing export orders eased marginally. With seasonality only partly explaining the decline, the July Politburo meeting confirmed that there will be further demand-supportive measures in 2H26.