China’s manufacturing activity continued to contract in August as new Covid-19 infections, the worst heat waves in decades and a struggling housing sector weighed on output, suggesting the economy will struggle to maintain momentum.
The official Purchasing Managers Index (PMI) for China’s manufacturing rose to 49.4 in August from 49.0 in July, the National Bureau of Statistics said on Wednesday.
While the PMI slightly beat expectations of 49.2 in a Reuters poll, it remained below the 50 mark that separates contraction from growth for the second straight month, suggesting prolonged weakness in the sector.
The survey shows that the world’s second-largest economy is struggling to come out of the sluggish growth seen in the second quarter, with risks affecting prospects in the face of high inflation and the Ukraine war.
“Official PMIs show a further loss in economic strength this month after the reopening momentum waned and the housing sector downturn deepened,” Julian Evans-Pritchard, Chinese economist at Capital Economics, said in a note.
“We continue to think that the economy will struggle to make much progress in the coming months.”
The PMI production sub-index was unchanged but still in contraction territory as production was halted by a crisis and energy, while the new orders sub-index rose by 0.7 point.
The new export orders index rose from 47.4 to 48.1.
Extreme heat and drought have also caused some regions to suspend industrial production to secure residential electricity supplies, disrupting the operations of well-known manufacturers such as Foxconn and battery giant CATL.
Some construction work was also suspended due to the heat, dragging the official non-manufacturing PMI in August to 52.6 from 53.8 in July.
The official Composite PMI, which combines the industry and services sectors, dropped from 52.5 a month earlier to 51.7.
Source: CNN Brasil
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