China's economy continued to produce the goods in June

Photo: iStock

Activity levels across China’s manufacturing and non-manufacturing sectors accelerated unexpectedly in June, ending a strong first half of the year for the world’s second largest economy.

According to China’s National Bureau of Statistics (NBS), the nation’s manufacturing Purchasing Manager’s Index (PMI) came in at 51.7 in June, topping expectations for a decline to 51.0.

It was the highest reading since March, improving on the 51.2 level reported in May.

The PMI measures changes in activity levels across China’s manufacturing sector from one month to the next. Anything above 50 signals that activity levels are improving while a reading below suggests they’re deteriorating. The distance away from 50 indicates how quickly activity levels are expanding or contracting.

So at 51.7, not only did activity levels improve in June, they did so at a faster pace.

It was also the eleventh consecutive month that the PMI came in above the 50 level.

The NBS said that production, new orders and new export orders grew at a faster pace than May, with the strength in the latter two readings a good sign for activity levels in the months ahead given they are seen as lead indicators.

However, input prices fell fora third consecutive month, indicating that upstream price pressures continue to ease.

Mirroring the strength in the manufacturing index, other areas of the economy also performed strongly in June.

The separate non-manufacturing PMI rose to 54.9, leaving it at the second-highest level since May 2014.

This PMI measures the performance across the other sectors in the Chinese economy, including services and construction.

The NBS said that the service sector PMI rose to 53.8, up 0.3 points on May, while the construction PMI increased by one point to 61.4, indicating activity levels are rapidly improving.

While there are always questions about the veracity of Chinese government data, both reports suggest the economy is strengthening heading into the second half of the year.

Markets will be eyeing separate PMI releases from IHS Markit next week for confirmation of the strength seen in the data released today.

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