Sign up now for FREE unlimited access to Reuters.com Register
China’s official July PMI below forecasts July official services PMI rises at a slower pace COVID outbreaks, cooling global demand, key property risks A major incentive considered unlikely, the government fails to mention the development target
BEIJING, July 31 (Reuters) – China’s factory activity unexpectedly shrank in July after recovering from last month’s COVID-19 lockdowns, as new outbreaks of the virus and a gloomy global outlook weighed on demand, a survey showed on Sunday. The official manufacturing purchasing managers’ index (PMI) fell to 49.0 in July from 50.2 in June, below the 50-point mark that separates contraction from growth, the National Bureau of Statistics (NBS) said. Analysts polled by Reuters had expected an improvement to 50.4. Sign up now for FREE unlimited access to Reuters.com Register “The level of economic prosperity in China has fallen, the foundations for recovery still need to be consolidated,” NBS senior statistician Zhao Qinghe said in a statement on the bureau’s website. Continued contraction in the oil, coal and metals smelting industries was one of the main factors driving July’s manufacturing PMI, he said. The reading was the lowest in three months, with individual indicators for output, new orders and employment contracting. Chinese manufacturers continue to struggle with high raw material prices, which are squeezing profit margins, as the export outlook remains clouded by fears of a global recession. Weak demand has limited the recovery, Bruce Pang, chief economist and head of research at Jones Lang Lasalle Inc., said in a research note. “Third quarter growth may face more challenges than expected as the recovery is slow and fragile.” The official non-manufacturing PMI in July fell to 53.8 from 54.7 in June. The official composite PMI, which includes manufacturing and services, fell to 52.5 from 54.1. China’s economy grew little in the second quarter amid widespread lockdowns, and top leaders recently signaled that their strict zero-Covid-19 policy will remain a top priority. read more Policymakers are poised to miss their GDP target of “around 5.5 percent” for this year, state media reported after a high-level meeting of the ruling Communist Party. read more Beijing’s decision to drop its growth target report has quelled speculation that authorities will implement massive stimulus measures, as they have often done in previous downturns. Capital Economics says the policy tightening, along with the continued threat of more restrictions and weak consumer confidence, are likely to make China’s economic recovery more protracted.
PASTORAL RECOVERY
After a rebound in June, the recovery of the world’s second-largest economy has faltered as outbreaks of COVID-19 have led to tighter restrictions on activity in some cities, while the once-strong real estate market has lurched from crisis to crisis. Chinese manufacturers are still struggling with high raw material prices, which are squeezing profit margins, and the outlook for exports is clouded by fears of a global recession. China’s southern megacity Shenzhen has pledged to “mobilize all resources” to contain the slow-spreading coronavirus outbreak, ordering strict testing and temperature checks and a lockdown for buildings affected by COVID. read more The port city of Tianjin, home to factories linked to Boeing ( BA.N ) and Volkswagen, and other areas increased restrictions this month to combat new outbreaks. read more According to World Economics, lockdown measures had some impact on 41% of Chinese companies in July, although the manufacturing business confidence index rose significantly from 50.2 in June to 51.7 in July. Sign up now for FREE unlimited access to Reuters.com Register Report from Beijing Newsroom. Edited by Himani Sarkar and William Mallard Our Standards: The Thomson Reuters Trust Principles.
