Factory activity in China remained in contraction for a third consecutive month in July, adding to Beijing’s economic concerns.
The official manufacturing purchasing managers’ index (PMI) – a survey of sentiment among factory owners – stood at 49.4 in July, down from a reading of 49.5 in June, the National Bureau of Statistics (NBS) said on Wednesday.
The reading was in line with a forecast of analysts from Reuters, which had predicted a reading of 49.4.
A reading above 50 typically indicates expansion of economic activity, whereas a reading below implies a contraction.
The manufacturing index was “basically stable”, according to the NBS, but it had been affected by a decline in market demand, as well as extreme weather, including high temperatures and floods.
Without a meaningful change of fiscal policy stance, the growth outlook largely depends on how long the strong export growth can continue
Within the official manufacturing PMI, the new manufacturing export order subindex, meanwhile, stood at 48.5 in July, compared to a reading of 48.3 in June.
“Manufacturing PMI stayed below 50 in July as domestic demand remained weak. The Politburo meeting [on Tuesday] did not signal a significant change of policy stance in the second half of the year,” said Zhang Zhiwei, president and chief economist at Pinpoint Asset Management.
“Without a meaningful change of fiscal policy stance, the growth outlook largely depends on how long the strong export growth can continue.”
Elsewhere, the non-manufacturing PMI – a measure of sentiment in the service and construction sectors – stood at 50.2 in July compared to 50.5 in June, remaining in expansion territory for the 19th straight month.
The reading in July fell short with the forecast from Reuters, which had predicted a reading of 50.3.
Within the non-manufacturing PMI, the construction subindex stood at 51.2 from 52.3 in June, while the services subindex stood at 50 from 50.2 in June.
Elsewhere, China’s official composite PMI – which tracks both the services and manufacturing sectors – declined from 50.5 in June to 50.2 in July.
The world’s second-largest economy grew by 4.7 per cent in the second quarter compared to a year earlier, but weak consumption and a declining property market remain concerns for Beijing.
And on Monday, Citi revised down its annual gross domestic product growth rate forecast from 5 per cent to 4.7 per cent, citing the lower than expected second quarter growth as well as weak economic momentum.
