BEIJING: “China’s Weak Factory PMI Reveals Struggles in Export Sector”, China’s manufacturing activity slipped to a five-month nadir in July as factories grappled with falling new orders and low prices, an official survey showed on Wednesday, pointing to a grinding second half for the world’s production powerhouse.
The National Bureau of Statistics (NBS) purchasing managers’ index (PMI) contracted for a third month, easing to 49.4 from 49.5 in June, below the 50-mark separating growth from contraction, but just ahead of a median forecast of 49.3 in a Reuters poll.
Sentiment remains gloomy among manufacturers as domestic demand is increasingly under siege and external pressures from trade tensions loom large for China’s US$18.6 trillion economy, which grew more slowly than expected in the second quarter.
Producers reported factory gate prices were at their worst in 13 months, while employment stayed in negative territory, with its sub-index last expanding in February 2023 and pointing to a somnolent domestic economy and China’s increasing reliance on exports for momentum.
Furthermore, hopes that strong exports would spark a broader economic recovery were dashed by extreme weather conditions, as flooding and high temperatures hurt production lines over July, NBS senior statistician Zhao Qinghe said.
Policymakers, however, have been seemingly slow to recognise the magnitude of the economy’s mounting afflictions.
“The only silver lining is that the recent loss of momentum appears to have made officials more serious about turning up the gears of near-term policy support,” said Gary Ng, assistant economist at Capital Economics, adding that it “should underpin a recovery in activity in the coming months.”
Consumers have cut back spending on big-ticket items and shied away from premium-priced goods. Car sales, the biggest component of China’s retail sales, fell for the third month in June. Starbucks, which has thousands of stores across its second-largest market, reported a 14 per cent plunge in quarterly China sales as coffee drinkers gravitated to cheaper offerings.
Policymakers promised further stimulus to encourage low- and middle-income groups to spend more during a meeting of the top-decision making body of the ruling Communist Party on Tuesday, but stopped short of announcing specific steps.
