China factory activity shrinks for third straight month

A Chinese man sits outside a store trying to sell his handcrafted souvenir in downtown Beijing, Friday, July, 26, 2024. (AP Photo/Vincent Thian)

Beijing, China — Factory activity in China shrank for a third straight month in July, official data showed Wednesday, a day after Beijing pledged more state support to boost activity in the country’s stuttering economy.

A key measure of factory output, the manufacturing purchasing managers’ index (PMI) stood at 49.4 in July, down slightly from 49.5 in June, the National Bureau of Statistics (NBS) announced.

The latest monthly figure was in line with a Bloomberg forecast based on a survey of analysts.

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A PMI figure above 50 indicates an expansion in activity, while anything below that points to a contraction.

Beijing is struggling to achieve its target of five percent annual growth this year — a goal considered ambitious by many economists.

Three consecutive months of contraction in the vital manufacturing sector is a worrying sign for officials, ramping up pressure for more state support to boost the world’s second-largest economy.

In a statement Wednesday, NBS statistician Zhao Qinghe attributed the latest decline to “traditional off-season production, insufficient market demand and extreme weather including high temperatures and flooding disasters”.

The NBS also said July’s non-manufacturing PMI — which takes the pulse of activity in the services sector — dipped to 50.2 from 50.5 the previous month.

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That was slightly lower than the 50.3 forecast in the Bloomberg survey and continues a four-month trend of slowing expansion since a peak of 53.0 recorded in March.

Chinese leaders including President Xi Jinping promised Tuesday to help boost consumption and ease pressure on the country’s ailing property sector, following a gathering of the Communist Party’s top brass.

However, Zhang Zhiwei, president and chief economist at Pinpoint Asset Management, said in a note: “The Politburo meeting… did not signal a significant change of policy stance in the second half of the year.”

Wednesday’s PMI data showed that “domestic demand remains weak”, said Zhang, adding that “without a meaningful change of fiscal policy stance, the growth outlook largely depends on how long the strong export growth can continue”.