Chinese manufacturing activity last month slowed further, official data showed yesterday, an early sign of weakness for the world’s second-largest economy in the second half of this year.
The official Purchasing Managers’ Index (PMI) stood at 50 last month, China’s National Bureau of Statistics (NBS) said in a statement.
The reading, which tracks activity in China’s vast factory and workshop sector, decelerated slightly from 50.2 in June.
The index is seen as a key barometer of the Asian giant’s economic health, a key driver of global growth. A figure above 50 signals expansion in the sector, while anything below indicates contraction.
“The decline of the official PMI suggests the manufacturing sector remained weak,” economists from Australia and New Zealand Banking Group Ltd said in a statement.
They predicted that China’s government would further ease credit in the second half of the year in an attempt to shore up growth.
The official report showed a better result than an independent survey sponsored by Chinese media group Caixin, announced late last month. Its preliminary PMI reading for last month tumbled to a 15-month low of 48.2.
Caixin is due to release the final figure, compiled by financial information services provider Markit, tomorrow.
A similar activity survey yesterday suggested strength in the services sector continued to offset some of the persistent weakness at factories, but there were worrying signs on that front, too.
The official non-manufacturing PMI last month edged up to 53.9, compared with the previous month’s reading of 53.8, pointing to solid expansion.
However, services companies also reported softer orders, with the new orders sub-index falling to 50.1 last month from 51.3 in June, and firms cut jobs at a slightly faster pace.
The services sector has accounted for the biggest part of China’s economic output for at least two years, with its share rising to 48.2 percent last year, compared with the 42.6 percent contribution from manufacturing and construction.
China’s economy expanded 7.4 percent last year, the weakest level since 1990, and has slowed further this year, growing 7 percent in each of the first two quarters.
Authorities, while accepting the need to steer China’s growth lower to make it more sustainable, have still taken stimulatory measures to put a floor on the slowdown.
However, adding uncertainty to China’s growth outlook has been a bout of intense volatility in the nation’s benchmark Shanghai stock index that saw it plunge more than 30 percent after peaking on June 12, forcing authorities to implement support measures, including limiting stock sales and funding purchases.
The Chinese Communist Party’s (CCP) Politburo Standing Committee has promised to step up “targeted” adjustments to economic policy to foster stable growth in the world’s second-largest economy, media said on Thursday.
In a rare acknowledgement of the challenges ahead, state radio quoted the CCP decisionmaking body as saying that China had yet to find new drivers to power its economy at a time when old engines are flagging.
Additional reporting by Reuters
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