In August, China’s factory activity declined for the fifth consecutive month, and non-manufacturing activity reached a new low for the year, indicating that the slowdown in the world’s second-largest economy may not yet have hit its bottom.
The official manufacturing purchasing managers’ index (PMI) slightly improved to 49.7 in August from 49.3 in July, according to the National Bureau of Statistics. This was better than the Reuters poll’s median forecast of 49.4. A PMI reading above 50 signals growth, while below 50 indicates contraction.
Zhao Qinghe, a senior NBS official, noted that insufficient market demand remains a significant issue for businesses, highlighting that a robust recovery in manufacturing is still needed.
August Data Shows Continued Contraction in Manufacturing and New Lows for Non-Manufacturing Activity Amidst Rising Inflationary PressuresAlthough there were some positive signs within the manufacturing PMI sub-indexes—four of which showed expansion—the non-manufacturing PMI, which covers services, fell to 51.0 in August from 51.5 in July and 53.2 in June.
This decline raises concerns about meeting Beijing’s 5% growth target for the year, exacerbated by ongoing issues in the property sector, including credit problems and weak sales.
Beijing has implemented targeted measures to stimulate the economy, including boosting lending, stock investments, and housing demand.
However, data revealed mixed results: while manufacturing sub-indexes for production and new orders hit five-month highs, the new orders index for non-manufacturing dropped to 47.6. The construction sector’s new orders rose to 48.5, but service sector orders decreased to 47.4.
Input prices in both sectors rose in August, suggesting renewed inflationary pressures after recent signs of disinflation or deflation.