Heatwaves, Covid cases scald China's manufacturing activity in August

Covid cases, property sector woes also keep PMI below 50 in August

China’s factory activity extended declines in August as Covid infections, the worst heatwaves in decades and an embattled property sector wei­ghed on production, suggesting the economy will struggle to sustain momentum.

The official manufacturing purchasing managers’ index (PMI) rose to 49.4 in August from 49.0 in July, the National Bureau of Statistics (NBS) said on Wednesday.

While the PMI slightly beat expectations for 49.2 in a Reut­ers poll of analysts, it remained below the 50-point mark that separates contraction from growth for the second straight month, suggesting protracted weakness in the sector.

The survey shows the world’s secondlargest economy is struggling to emerge from the sluggish growth seen in the June quarter, with risks darkening the outlook as high inflation and the Ukraine war hit external demand.

“The PMIs show a further loss in economic momentum this month as the reopening boost waned and the property downturn deepe­ned,” Julian Evans-Pritchard, a China economist said. “We continue to think the economy will struggle to make much headway during the coming months.”

Raymond Yeung, Greater China chief economist at ANZ, trimmed his 2022 gross domestic product forecast to 3.0 per cent from 4.0 per cent as demand weakened.

He also expects activity will be disrupted due to tighter virus controls ahead of the Communist Party Congress in October. The sub-index for output remained unchanged but is still in contraction territory as production is disrupted by a power crunch, while the new orders sub-index grew by 0.7 point.

The new export orders ind­ex rose from 47.4 to 48.1, indicating softening momentum. Small manufacturers, which are less equipped to mitigate Covid disruptions than their larger peers, suffered greater pressure in August with their PMI down 0.3 point.