Explainer | Is support coming at the right time for China’s economy? 4 takeaways from July’s PMI data

China’s manufacturing sector eased in July due to weak domestic demand, as the world’s second-largest economy got off to a weak start in the third quarter

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Andrew Mullen

Published: 12:00am, 6 Aug 2024Updated: 1:40am, 6 Aug 2024

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1. Weak domestic demand drags manufacturing

The sight of China’s official manufacturing purchasing managers’ index (PMI) and its Caixin/S&P Global counterpart falling in July led analysts to suggest the third quarter was off to a poor start.

China’s official manufacturing PMI – a survey of sentiment among factory owners – stood at 49.4 in July, down from a reading of 49.5 in June, in line with a forecast of analysts from Reuters.

The gauge remained in contraction for a third consecutive month, with analysts attributing the fall to weak domestic demand, while the National Bureau of Statistics said the manufacturing index was “basically stable”.

However, the statistics bureau did point to a decline in market demand, extreme weather such as high temperatures and floods and traditional off-season production.

A reading above 50 typically indicates an expansion of economic activity, whereas one below 50 implies a contraction.