China factory activity unexpectedly worsens as exports stumble

BEIJING – China’s factory activity unexpectedly deteriorated in July to a six-month low despite a tariff truce with the US, as early signs emerge that exports are slowing and weak domestic demand persists.

The official manufacturing purchasing managers’ index (PMI) was 49.3, versus 49.7 in June, said the National Bureau of Statistics (NBS) on July 31. The median estimate of economists surveyed by Bloomberg was 49.7. A reading below 50 indicates contraction.

The non-manufacturing measure of activity in construction and services fell to 50.1 from 50.5 in June, according to the statistics office. That compared with a forecast of 50.2.

In a statement accompanying the data release, NBS blamed high temperatures, heavy rain and

flooding in some regions

for disrupting the manufacturing industry, which it said entered “the traditional off-season” in July.

The PMI figures are the first official data available each month to provide a snapshot of the health of the Chinese economy. 

China’s top leaders

touted the nation’s economic strength

at a gathering of the decision-making Politburo on July 30. That came after the country registered a record trade surplus in the first half of the year on soaring shipments to South-east Asia and stabilising exports to the US. 

But China’s resilience is facing headwinds. Cargo throughput at the nation’s ports last week was the lowest in almost three months and dropped nearly 7 per cent from the previous seven days, a sign trade may be starting to slow.

Weak consumption could intensify deflationary pressures.

A recent central bank poll found that Chinese households turned more pessimistic in the last quarter and their view of the jobs market fell to its worst ever.

That has fanned fears of a slowdown in the second half of the year, even after a strong first six months of activity exceeded the official annual expansion target of about 5 per cent. BLOOMBERG