2023-07-31 13:14:08
The Chinese government announced measures to support consumption on Monday, after the publication of indicators suggesting a contraction in manufacturing activity for the 4th consecutive month and a slowdown in growth.
The Purchasing Managers’ Index (PMI), a reflection of the health of the industrial world, stood at 49.3 points, against 49 in June, announced the National Bureau of Statistics (BNS).
This is higher than the forecasts of analysts polled by the Bloomberg agency (48.9) but confirms the trampling of the post-Covid recovery in China.
A figure above 50 indicates an expansion in manufacturing activity and below that indicates a contraction.
The PMI had reached 52.6 points in February, its highest level in a decade, but it has since fallen.
The SNB, however, welcomed that the contraction was less strong than that of June, with a “situation of the manufacturing industry” which “continues to improve”, he indicated.
“The general level of manufacturing activity continues to improve,” said NBS statistician Zhao Qinghe in a statement.
He also observed the low volume of foreign orders, speaking of a ‘complicated external environment’. In June, exports fell 12.4%, the steepest decline in three years according to customs data.
‘The data sends a mixed message’, according to Zhiwei Zhang, an analyst from Pinpoint Asset Management, while pointing to ‘a still rather weak economic momentum’.
‘The Politburo meeting acknowledged the challenges facing the economy. The key question is what measures will be launched after the meeting and how effectively,” he added.
China lifted its anti-Covid restrictions in force for nearly three years in December, initially allowing its economy to rebound.
But the economy is penalized by the over-indebtedness of the real estate sector, a traditional pillar of growth, sluggish consumption and the global slowdown which is also weighing on demand for Chinese goods.
GDP for the second quarter rose by +6.3% over one year, according to a figure released last Monday, well below analysts’ expectations.
The Chinese government has set a growth target for this year of ‘around 5%’, one of the lowest in decades.
The recovery is being thwarted by ‘new difficulties and new challenges’, Chinese leaders admitted last week, noting the record unemployment rate among young people.
In this context, the government has published a comprehensive 20-point plan to boost consumption, including further support for housing demand, the culture and tourism sector, as well as ‘green consumption’, including vehicles electrical.
These include increasing the supply of subsidized housing and trying to solve other housing problems, especially for young people.
The crisis in the real estate sector has many developers struggling to survive, exacerbating the crisis of confidence among buyers.
The government also wants to support the development of major festivals and sporting events, including online, as well as spending on food and care services. Infrastructure in rural areas needs to improve.
The PMI index for non-manufacturing activity, which includes services in particular, remains in positive territory, however falling to 51.5 in July, against 53.2 in June, the SNB announced on Monday.
A result well below analysts’ expectations (53).
/ATS
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