- China's manufacturing activity in August shrank for a second straight month, with the official PMI at 49.8, better than the 49.6 forecast, indicating ongoing economic pressure.
- The sub-indexes for production and new orders expanded to 50.4 and 50.6, respectively, while new export orders rebounded to 50.1.
- The non-manufacturing gauge remained unchanged at 49%, while the construction sub-index fell to 46.9%.
- Economists expect better growth for the rest of the year as adverse weather fades and local governments accelerate fiscal spending.
- China's economy has come under mounting strain, with the weakest pace since late 2022, as soft domestic demand and a prolonged property slump continue to weigh on activity.
- Consumer spending has stalled, urban investment has contracted at a faster pace, and unemployment has ticked higher, deepening the economic malaise.
China's manufacturing sector faced continued contraction in August, with the official PMI at 49.8, slightly above the forecast of 49.6. This marks the second month of decline, highlighting persistent economic challenges as domestic demand remains weak and the property market struggles.12
Despite the overall contraction, production and new orders showed signs of improvement, with sub-indexes rising to 50.4 and 50.6, respectively. New export orders also rebounded to 50.1, indicating a recovery in overseas demand amidst global economic uncertainties.34
However, the construction sector lagged, with the non-manufacturing gauge unchanged at 49%, and the construction sub-index falling to 46.9%. Retail sales and industrial output have also weakened, contributing to the economic malaise that has deepened in the second half of the year.5
Economists predict that growth may improve in the coming months as adverse weather conditions ease and local governments ramp up fiscal spending. Tianchen Xu, a senior economist at the Economist Intelligence Unit, noted that Beijing is likely to accelerate fiscal measures to support the economy, which could expedite project approvals and fund disbursements.6
Overall, while there are signs of recovery in certain sectors, the broader economic outlook remains uncertain as China grapples with ongoing challenges in consumer spending and investment.8
“The production and new orders sub-indexes expanded to 50.4 and 50.6, signaling supply and demand improvements, but employment and raw materials inventory remained below the 50 threshold. New export orders rebounded to 50.1, helped by AI-driven demand for Chinese tech goods.”
CNBC
