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September 2, 2015

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Home » Business » Economy

Factories and services in slowdown

THE performance of China’s manufacturing and services firms weakened in August, with activity in state-owned industrial companies contracting for the first time in six months and that in private manufacturers falling to a 76-month low, according to surveys released yesterday.

The official Purchasing Managers’ Index, a comprehensive gauge of operating conditions in large state-owned industrial companies, landed at 49.7 last month, down from 50 in July and 50.2 in June, according to the National Bureau of Statistics and the China Federation of Logistics and Purchasing.

A reading above 50 is expansion, and below it contraction. The latest figure was the first contraction since February after marginal growth in the past six months.

The Caixin China Manufacturing Purchasing Managers’ Index, a similar indicator slanted toward private and export-oriented companies, landed at 47.3 for August, down from July’s 47.8 and the worst since March 2009.

The figure has been below 50 for the sixth straight month after a brief rebound in February.

Zhao Qinghe, an analyst at the bureau, said domestic demand remained weak and the manufacturing sector had insufficient growth impetus.

“The slowdown was in part related to China’s enhanced efforts on industrial upgrading,” Zhao said. “High energy-consuming companies reported faster deterioration in PMI, while the bad weather in summer, including those hot, rainy and windy days, hampered industrial production and exaggerated the weakness as well.”

The PMI’s component indexes showed industrial production lost 0.7 points from a month earlier to 51.7 in August, while new orders dropped by 0.2 points to 49.7, falling below 50 for the second consecutive month.

Liu Ligang, an economist at Australia & New Zealand Banking Group Co Ltd, said the readings reflected faltering sentiment amid sluggish economic growth and the stock market turmoil.

“China’s manufacturing activities remained weak ... We now expect China’s growth to expand 6.4 percent year on year in the third quarter,” Liu said. “As more easing measures are expected, growth could rebound to 6.8 percent in the fourth quarter.”

China’s economic performance surprised the market with a 7 percent increase in the second quarter, compared with market expectations of a 6.8 percent rise.

But the data in the past two months, including trade, industrial production, retail sales and fixed-asset investment, all moderated.

China’s service firms also reported less vibrant activities. The official non-manufacturing PMI retreated to 53.4 in August from July’s 53.9, while the Caixin Services Business Activity Index posted 51.5 in August, down from 53.8 in July and signaled the slowest increase in the current 13-month sequence of expansion.

He Fan, chief economist at Caixin Insight Group, said the expansion of service activities was not strong enough to offset the contraction in manufacturing.

Earlier figures showed net earnings of manufacturing companies contracting for the second straight month in July.

“In the face of continued pressure on growth, macroeconomic stabilization policies must continue and fresh reform measures must be introduced,” He said.

“Fine-tuning should go hand in hand with speedier implementation of structural reform to release the full potential of growth and lead the market to confidence,” He said.




 

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