China's factory activity contracted in August. According to the survey, disruptions from power outages and Covid-19 outbreaks have hit large and state-owned companies as well as smaller firms.
The Manufacturing Purchasing Managers Index fell to 49.5 last month from 50.4 in July, according to a statement released by Caixin and S&P Global on Thursday. That's lower than the median estimate of 50 in the poll by Bloomberg economists.
The index fell below 50, the line separating expansion and contraction for the first time since May.
The incoming data is in line with the official survey released on Wednesday, which showed a contraction in factory activity in August. The Caixin index tracks smaller, private, and export-oriented firms, while the official PMI mostly tracks larger, state-owned businesses.
"The increase in Covid-19 cases, the extreme heat wave and restricted power usage have caused a slight deterioration in overall business conditions in the manufacturing sector," said Wang Zhe, senior economist at Caixin Insight Group.
“In the face of negative factors such as recurrent Covid-19 cases and natural disasters, more subsidies and assistance are needed to poor and low-income groups amid the stagnant job market and shrinking consumer demand,” Wang said.
China's Caixin PMI contracted in August, indicating that the recovery of the manufacturing sector has lost momentum. The weaker-than-expected data reflects many shocks, from COVID-19 outbreaks and power outages to disruption in the real estate industry.
Growth is losing pace
The export survey showed that growth in supply slowed sharply and demand contracted. A weakening global outlook points to more weakness ahead.
The world's second-largest economy faces increased risks from COVID-19 outbreaks and lockdowns as cases spread to mainland states. As a historic drought causes power outages, the real estate industry continues to struggle with low confidence from homebuyers and property developers.
According to the data, Caixin PMI's new export order sub-indicator also contracted for the first time in three months. This shows that foreign demand has contracted, which has provided an important boost to the Chinese economy during the pandemic.
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