China’s Economy Contracted in August, as Manufacturing PMI Dropped to 50.1

Source: Reuters

China’s businesses and the wider economy came under significant pressure in August as factory activity grew at a slower pace while the services sector dropped into contraction. CSI 300 Index down -0.16%, CNY USD up +0.07%

• China’s economy posted an impressive recovery from the Covid-19-engineered slump, but momentum has weakened due to domestic Covid-19 outbreaks, high raw materials, slowing exports, tighter measures to control hot property prices, and efforts to reduce carbon emissions.
• The official manufacturing Purchasing Manager’s Index (PMI) dropped to 50.1 in August from 50.4 in July, holding just above the 50-point level that separates growth from contraction.
• Nomura economists stated that worse-than-expected August PMIs add conviction to the view that a growth slowdown in H2 could be notable.
• Beijing will maintain its policy combination of “targeted tightening” for a few sectors, especially the property sector and high-polluting industries, backed by ‘universal easing’ for the rest of the economy.
• The manufacturing PMI revealed demand dropped sharply, with new orders contracting and measurement for new export orders falling to 46.7, the lowest in over a year.
• Factories also laid-off workers at the same pace as July.