China’s manufacturing activity posted a surprise decline in July, official data showed on Sunday, amid weak demand and as strict zero-Covid restrictions continue to dampen growth.
The Purchasing Managers’ Index (PMI), a key indicator of manufacturing activity in the world’s second-biggest economy, was 49.0 in July, down from 50.2 in June and below the 50-point mark separating growth from contraction, National Bureau of Statistics data shown.
While Covid curbs have eased in major cities like Shanghai and Beijing, sporadic lockdowns across the country have worried businesses and consumers.
“In July, the manufacturing PMI fell…due to factors such as the traditional off-season for manufacturing, insufficient release of market demand and the decline in prosperity of energy-consuming industries,” Zhao Qinghe, senior statistician at the NBS, said in a statement.
Zhao added that sharp volatility in commodity prices has prompted some companies to take a wait-and-see stance and “weaken purchase intentions.”
The proportion of firms saying there was insufficient market demand has also risen for four straight months, he said, noting that it was the “key difficulty” among manufacturers.
But officials are showing little sign of easing strict pandemic restrictions, with policymakers appearing to be emphasizing zero-Covid over growth at a Politburo meeting this week, where they pledged to strive for “the best outcome” rather than economic and social goals to reach.
“By acknowledging the difficulties, the government has finally become flexible on this year’s growth target,” analysts at ANZ Research said in a statement.
China’s leaders originally set a GDP growth target of around 5.5 percent for the full year, but with the economy growing just 0.4 percent in the second quarter, analysts believe that target is unlikely to be met.
China’s non-manufacturing PMI also fell to 53.8 in July, down from 54.7 in June, NBS data showed on Sunday.
This follows a policy of boosting consumption and a pick-up in construction activity, the NBS statement said.
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