China’s factory activity surprises with first slump in five months
Domestic consumption and business confidence is still sluggish
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CHINA’S factory activity unexpectedly contracted for the first time in five months, adding to signs of slowing economic momentum.
The official manufacturing purchasing managers’ index was 49.2 in July, versus 50.3 in June, the National Bureau of Statistics said on Friday (Jul 31). The median estimate of economists surveyed by Bloomberg was 50.1.
The non-manufacturing measure of activity in construction and services fell more than forecast to 49 — the lowest since December 2022 — from 50.2 last month, the statistics office said. A reading below 50 indicates contraction.
The declines suggest economic weakness is becoming more entrenched, with soft domestic demand outweighing resilience in exports.
Investors are increasingly focused on whether policymakers will roll out stimulus measures to stabilise the economy after the government dialled back spending on infrastructure in recent months.
Concerns over the health of China’s economy have been intensifying since April as growth weakened and became more unbalanced. Though the energy shock unleashed by the war in Iran has helped drag China out of its yearslong deflation, consumer and business confidence is still sluggish.
Economic growth slowed to 4.3 per cent in the second quarter from 2025, the weakest quarterly growth in more than three years. But a strong first quarter means that growth in January-June was 4.7 per cent, within this year’s official target range of 4.5 per cent to 5 per cent.
Top officials pledged to “roll out pragmatic and effective new policies in a timely manner” during a key policy meeting on Thursday.
With exports soaring at a double-digit pace this year, economists had expected officials to act with little urgency for now in rolling out any fresh stimulus measures. Policymakers also pledged to speed up the pace of public spending and the use of funds raised through government bonds. REUTERS
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