China’s factory activity contracts for third straight month, but ‘silver lining’ emerges
- China’s official manufacturing purchasing managers’ index (PMI) remained in contraction for a third consecutive month in July
Factory activity in China remained in contraction for a third consecutive month in July, suggesting that the economy weakened further, but analysts expect a recovery in the coming months with Beijing “intent on ramping up policy support”.
A reading above 50 typically indicates an expansion of economic activity, whereas a reading below implies a contraction.
Analysts attributed the fall to weak domestic demand, while the NBS said the manufacturing index was “basically stable”. However, it did point to a decline in market demand; extreme weather such as high temperatures and floods; and traditional off-season production.
“The PMIs for July suggest that China’s economy weakened further this month. But the government now seems intent on ramping up policy support, which should underpin a recovery in activity in the coming months,” said Gabriel Ng, assistant economist at Capital Economics.
The top leadership vowed to unleash domestic demand, pledged more macro support, warned against “vicious competition” among local companies, and called for the full implementation of policies among local officials.