China’s factory activity contracts for third straight month, but ‘silver lining’ emerges
- China’s official manufacturing purchasing managers’ index (PMI) remained in contraction for a third consecutive month in July
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Factory activity in China remained in contraction for a third consecutive month in July, suggesting that the economy weakened further, but analysts expect a recovery in the coming months with Beijing “intent on ramping up policy support”.
A reading above 50 typically indicates an expansion of economic activity, whereas a reading below implies a contraction.
Analysts attributed the fall to weak domestic demand, while the NBS said the manufacturing index was “basically stable”. However, it did point to a decline in market demand; extreme weather such as high temperatures and floods; and traditional off-season production.
“The PMIs for July suggest that China’s economy weakened further this month. But the government now seems intent on ramping up policy support, which should underpin a recovery in activity in the coming months,” said Gabriel Ng, assistant economist at Capital Economics.
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