Beijing. China’s manufacturing activity fell to a five-month low in July as factories grappled with falling new orders and low prices, an official survey showed on Wednesday, pointing to a tough second half for the country.
The Office for National Statistics’ purchasing managers’ index (PMI) contracted for a third straight month, coming in at 49.4 from 49.5 in June, below the 50 mark that separates growth from contraction but just ahead of the median forecast of 49.3 in a Reuters poll.
The official non-manufacturing purchasing managers’ index (PMI), which includes services and construction, slowed to 50.2 points in July from 50.5 in the previous month.
Confidence remains low among manufacturers as domestic demand comes under increasing pressure and external pressures stemming from trade tensions weigh on China’s $18.6 trillion economy, which grew more slowly than expected in the second quarter.
Both the new orders and new export orders subindexes contracted for a third consecutive month in July, while employment and factory prices remained firmly in negative territory.
“The only silver lining is that the recent loss of momentum appears to have made policymakers more serious about ratcheting up support policies in the near term,” said Gary Ng, deputy economist at Capital Economics, adding that “it should underpin a recovery in activity in the coming months.”
On Tuesday, Chinese leaders signaled they would roll out new stimulus measures aimed at boosting residents’ incomes to encourage low- and middle-income groups to spend and expand domestic demand, but stopped short of announcing specific measures.
The decline in domestic consumption is closely linked to the fall in property values, which has impoverished families, since 70 percent of household wealth is in the real estate sector.
Confidence remains low among manufacturers as domestic demand comes under increasing pressure and external pressures stemming from trade tensions weigh on China’s $18.6 trillion economy, which grew more slowly than expected in the second quarter.
Consumers have cut back on spending on big-ticket items and steered away from high-priced goods. Auto sales, the biggest component of China’s retail sales, fell for a third straight month in June.
Starbucks, which has thousands of stores in its second-biggest market, posted a 14 percent drop in quarterly sales in China as coffee drinkers turned to cheaper offerings. And while half of the 300 billion yuan ($41.4 billion) in very-long-term Treasury bonds that China’s state planner announced last week will go to support a consumer redemption program, that amount is widely seen as too small to significantly boost the economic recovery, equal to just 0.12 percent of economic output and 0.3 percent of retail sales in 2023.
New home prices fell at their fastest pace in nine years in June and the PMI’s construction subindex grew more slowly in July, pointing to waning demand in a once-powerful housing sector.
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– 2024-08-01 14:06:31
