BEIJING--Factory activity in China weakened in August to a
three-month low according to a closely watched manufacturing index,
undercutting momentum as the world's second-largest economy
struggles to find its feet.
The preliminary HSBC China Manufacturing Purchasing Managers
Index fell to 50.3 in August, compared with a final reading of 51.7
in July, HSBC Holdings PLC said Thursday. The government's
competing index also measured 51.7 in July.
The HSBC index tends to reflect the outlook among smaller
private companies while the official index looks more closely at
larger state-owned companies. A reading above 50 indicates
expansion from the previous month, while a reading below 50
indicates contraction.
"Today's data suggest that the economic recovery is still
continuing, but its momentum has slowed again," HSBC economist Qu
Hongbin said in a statement. "Therefore, industrial demand and
investment activity growth will likely stay on a relatively subdued
path."
The subindexes for new orders and new-export orders in the
preliminary August manufacturing figures compiled by HSBC and data
provider Markit rose at a slower pace than in July, while the
employment subindex contracted further, HSBC said.
The weakening outlook for factory output came as China attempts
to put a floor under decelerating growth. China saw its economy
grow 7.5% in the second quarter year over year, marginally better
than the 7.4% recorded in the first quarter, its weakest pace in 18
months.
Early hopes that the worst was over and that stronger exports
and recovering global demand would help turn the tide were shaken,
however, by July's weak domestic investment demand and credit
data.
China has responded with a range of targeted stimulus measures
in recent months, including stepped-up spending on rail and
public-housing projects, looser monetary policies for farmers and
first-time home buyers and administrative reforms, including
reduced red tape. But these haven't been enough to counter a
slumping real-estate market, which accounts for over 20% of gross
domestic product when construction and related industries are
included, and which continues to drag down growth.
Average home prices in 70 Chinese cities fell 0.89% in July, for
the third straight monthly decline. House prices fell 0.47% in June
and 0.15% in May, according to the National Bureau of
Statistics.
The health of the Chinese economy is being watched closely as
economies in the rest of the world continue to struggle. After an
abysmal first quarter, the U.S. economy grew at a
stronger-than-expected 4% annual rate in the second quarter, even
as the economy of the 18-member euro zone stalled in the second
quarter and many Asian economies swoon.
Japan, the world's third-largest economy in nominal GDP terms,
suffered its worst contraction in the second quarter since 2011,
declining 6.8% on an annualized basis from the prior quarter, as a
sales-tax increase blunted retail demand.
Although China's 7.5% growth would be the envy of many other
countries, Beijing says it needs growth in the 7% range to generate
enough jobs for its huge population.
The preliminary or "flash" reading of the PMI is based on 85% to
90% of total responses to HSBC's survey each month, and is issued
about one week before the final PMI reading.
Liyan Qi, Mark Magnier