China’s manufacturing activity logged a surprise drop last month, official data showed yesterday, on the back of weak demand and as strict “zero COVID-19” restrictions continue to cast a pall on growth.
The purchasing managers’ index (PMI), a key gauge of manufacturing activity in the world’s second-biggest economy, was 49.0, down from 50.2 in June and below the 50-point mark separating growth from contraction, Chinese National Bureau of Statistics (NBS) data showed.
LOCKDOWNS CONTINUE
Photo: Bloomberg
While sweeping COVID-19 curbs have eased in major cities such as Shanghai and Beijing, sporadic lockdowns around the country have kept businesses and consumers worried.
“In July, the manufacturing PMI dropped ... due to factors such as the traditional off-season for production, insufficient release of market demand and decline in prosperity of high-energy-consuming industries,” Zhao Qinghe (趙清河), a senior statistician at the bureau, said in a statement.
Zhao said sharp price fluctuations of raw materials had led some companies to adopt a wait-and-see approach, “weakening purchasing intentions.”
The proportion of firms saying there was insufficient market demand had also increased for four consecutive months, he said, adding that it was the “main difficulty” among manufacturers.
However, officials show few signs of relaxing strict COVID-19 curbs, with policymakers appearing to emphasize “zero COVID-19” over growth in a Chinese Communist Party Politburo meeting last week, where they vowed to strive for “the best outcome” rather than to meet economic and social targets.
“In acknowledging the difficulties, the government has finally become flexible towards this year’s growth target,” ANZ Research analysts said in a note.
GDP GROWTH STALLING
Chinese leaders had originally set a full-year GDP growth target of about 5.5 percent, but with economic expansion of just 0.4 percent in the second quarter, analysts believe that China is unlikely to hit that goal.
China’s non-manufacturing PMI last month dropped to 53.8 from 54.7 in June, NBS data showed.
This follows policies to boost consumption and a pickup in construction activities, the NBS said.
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