Chinese factory activity in August fell for the second month in a row

BEIJING, China — Chinese factory activity declined in August for the second consecutive month, official data showed on Wednesday, as the sector was hit by strict COVID restrictions and extreme heat.

The Purchasing Managers’ Index (PMI), a key indicator of manufacturing in the world’s second-largest economy, came in at 49.4, down from 49.0 in July, but still below the low mark. 50 points separating growth from contraction, the National Bureau of Statistics (NBS) said the data showed.

Sporadic COVID-19 shutdowns around China have dampened consumer enthusiasm and business confidence, while scorching temperatures in large parts of the country this summer have prompted power rationing for factories.

The economy has faced “adverse factors including the epidemic and high temperatures” this month, NBS senior statistician Zhao Qinghe said in a statement.

Zhao said the data showed that “the recovery in manufacturing output and demand still needs to be strengthened”, although he noted an upturn in activity in agricultural processing and food producers ahead of the festival. mid-autumn on September 10.

China’s manufacturing PMI has been in contractionary territory for five of the past six months, following a months-long disruptive lockdown in Shanghai and COVID-related restrictions elsewhere.

But authorities show few signs of easing tough pandemic measures, with southern technology hub Shenzhen shutting down the world’s largest electronics market this week despite only dozens of daily cases in the city of more than 18 million.

China’s leaders had originally set a full-year GDP growth target of around 5.5%, but with economic expansion of just 0.4% in the second quarter, analysts say it’s unlikely. achieves this goal.

Zhao noted that while large companies saw an expansion in activity this month, small and medium-sized companies reported contractions, dragging the overall PMI lower.

“China’s economic weakness is increasingly demand driven,” said ANZ chief economist for Greater China Raymond Yeung.

“Consumption and investment sentiment by households and businesses is weak, raising the risk of a deflationary spiral.”

China’s non-manufacturing PMI index came in at 52.6 points in August, down from 53.8 in July, according to NBS data.

Statistician Zhao said the accommodation, catering and telecommunications industries have seen “rapid and sustained growth” over the past month.

But ANZ’s Yeung noted that weak service sector expansion “bodes ill for China’s overall growth prospects.”

He said authorities were likely to continue their tough approach to COVID ahead of a key political meeting in October, the 20th Communist Party Congress.

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