China’s Economy Improves in June From Lockdown-Induced Slump

• Buildup barometer returns to standard following a 2-month drop

• Car sales rise in June but domestic sales are low

China’s economy showed some improvement in June as Covid restrictions were gradually eased, although the recovery remains muted.

That’s the outlook based on Bloomberg’s aggregate index of eight early indicators for this month. The overall gauge returned to the neutral level after deteriorating for two straight months.

Fall in Covid cases and end of lockdown boosts the economy. The economic activity picked up in June after financial hub Shanghai lifted its lockdown, allowing businesses to restart and most residents to leave their homes. That can be seen in a rebound in small business confidence, which started growing again after contracting for two months.

A survey of more than 500 smaller firms showed that “demand and production recovered strongly among manufacturing,” and export-oriented smaller firms outperformed, according to Hunter Chan and Ding Shuang, economists at Standard Chartered Plc.

However, “the manufacturing recovery was more significant than services,” they said. Contact-intensive industries such as retail and catering continued to be a drag, while real estate, transport and information technology reported an acceleration in activity and construction jumped.

It will take more than a few months of strong growth to undo the mess caused to companies by the lockdowns over the past few months. The profits of private and foreign firms fell in the first five months of the year, while those of state-owned companies rose almost 10%.