Factory activity in China slowed in July amid Covid outbreaks and weaker demand, a private Caixin survey showed.
According to the survey, the Caixin/Markit manufacturing purchasing managers’ index (PMI) fell to 50.4 from 51.7 in June, a result well below expectations.
The result, that following a official shock poll a day earlier, which signaled a contraction last month, suggesting the country’s vast manufacturing sector faces a new period of uncertainty.
On Sunday, the official manufacturing PMI of the National Statistics Office (NBS) rose to 49.0 in July from 50.2 in June in an unexpected drop.
chinaManufacturing hubs including Shanghai saw a solid rebound in June due to widespread Covid lockdowns in the spring, but the momentum had already shown signs of slowing amid new virus outbreaks and weakening domestic demand and worldwide, as well as a prolonged downturn in the real estate market. .
“The polls suggest that chinaThe economic recovery slowed in July as the one-time boost from reopening faded,” said senior Julian Evans-Pritchard. china economist a Economy of capital. “It is consistent with our view that activity will remain below trend in the coming quarters.”
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Higher prices, weaker demand
In the Caixin survey, which focused more on smaller and export-oriented firms, a sub-index of output pointed to a second monthly increase, but it was notably slower than in June.
Growth in new orders, both domestic and export, also softened.
The employment index fell for a fourth month and fell to a 27-month low. The companies attributed the layoffs to cost-cutting, reduced sales and failure to replace voluntary departures.
“Companies, keen to cut costs in the face of sluggish market demand, were cautious in expanding their workforce,” said Wang Zhe, senior economist at Caixin Insight Group.
On a bright note, input costs for businesses rose only slightly after relentless price hikes squeezed profit margins. However, they had to reduce their selling prices for the third consecutive month due to low demand.
The toll on the rise chinaThe economy is evident with the country’s top leaders signaling their readiness to miss the government’s growth target of around 5.5% for this year and focusing on achieving the best results possible.
Noting that the third quarter will be a crucial period to recover the economy, Wang did not expect massive stimulus measures.
“Effective implementation of existing policies is a more practical option.”
Reuters with additional editing by Jim Pollard
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Jim Pollard
Jim Pollard is an Australian journalist based in Thailand since 1999. He worked for News Ltd newspapers in Sydney, Perth, London and Melbourne before traveling around Southeast Asia in the late 1990s. He was senior editor of The Nation for over 17 years and has a family in Bangkok.
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