ExplainerIs support coming at the right time for China’s economy? 4 takeaways from July’s PMI data
- China’s manufacturing sector eased in July due to weak domestic demand, as the world’s second-largest economy got off to a weak start in the third quarter
1. Weak domestic demand drags manufacturing
The sight of China’s official manufacturing purchasing managers’ index (PMI) and its Caixin/S&P Global counterpart falling in July led analysts to suggest the third quarter was off to a poor start.
The gauge remained in contraction for a third consecutive month, with analysts attributing the fall to weak domestic demand, while the National Bureau of Statistics said the manufacturing index was “basically stable”.
However, the statistics bureau did point to a decline in market demand, extreme weather such as high temperatures and floods and traditional off-season production.
A reading above 50 typically indicates an expansion of economic activity, whereas one below 50 implies a contraction.
“[The decline] appears to be driven by domestic weakness. The new export orders component rose last month amid wider evidence from high-frequency data on container throughput that Chinese exports remain robust,” said Gabriel Ng, assistant economist at Capital Economics.