China’s factory activity expanded at a slower pace in July due to higher raw material costs, equipment maintenance and extreme weather, adding to concerns of a slowdown in the world’s second-biggest economy.

The official manufacturing Purchasing Manager’s Index (PMI) eased to 50.4 in July from 50.9 in June, data from the National Bureau of Statistics (NBS) showed on Saturday, but remaining above the 50-point mark that separates growth from contraction.

Analysts had expected it to slip to 50.8.

China’s economy has largely recovered from disruptions caused by the pandemic, but manufacturers are grappling with new challenges from higher raw material prices, surging logistics costs and global supply chain bottlenecks.

The country is also racing to contain a fresh COVID-19 outbreak of the more infectious delta variant which surfaced in the eastern city of Nanjing. The zero-tolerance approach taken by the Chinese government could present significant downside risks to the economic recovery.