China’s economic recovery sputters as manufacturing PMI remains in contraction for fifth straight month

China’s manufacturing activities showed little sign of strengthening this month, despite Beijing having ratcheted up support for its ailing economy since a late-July meeting of the decision-making Politburo.

The official manufacturing purchasing managers’ index (PMI) rose to 49.7 in August from 49.3 in July, but it remained in contraction territory for the fifth month in a row, according to data released by the National Bureau of Statistics on Thursday.

Within the official manufacturing PMI, the new-orders subindex jumped into expansionary territory as it reached 50.2, up from 49.5 a month earlier, while the new-export-orders subindex remained low at 46.7 in August, up slightly from 46.3 in July.

Manufacturers’ business expectations, however, improved slightly last month, with the number rising to 55.6 from 55.1 in July.

The nation’s sequential second-quarter economic growth of 0.8 per cent, which shrank from 2.2 per cent in the first quarter, raised market worries that the world’s second-largest economy was losing growth momentum.

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Coupled with a property downturn and local-government debt crisis, the economic slowdown has prompted investment banks to lower their forecasts for China’s 2023 growth. Some have been lower than Beijing’s target of around 5 per cent for this year.

Leadership has responded since late July with measures to revive the private sector, encourage more household consumption and prop up foreign investors since late July.

Beijing has also started to loosen the reins on the real estate sector, which has been the biggest drag on the economy and has further deteriorated the finances of local governments.

Non-manufacturing PMI fell by 0.5 points to 51 in August, after the index moderated for four consecutive months with the overall economic slowdown.

The construction subindex, which has been partly affected by the ongoing property crisis, stood at 53.8, versus 51.2 in July.

More to come…

South China Morning Post