More weak economic signs from China

More weak economic signs from China

China’s official manufacturing purchasing managers index fell to 49.7 in August from 50 a month ago, falling short of market forecasts of 49.8. A reading above 50 indicates an expansion in manufacturing activity compared with the previous month, while a reading below points to a contraction. The weak performance led to a tumbling at the stock exchanges around the globe

The government’s nonmanufacturing PMI, also released on September 1, 2015, fell to 53.4 from 53.9 in July, showing expansion but at a slower pace.

China has set an economic growth target of about 7% for this year, and policy makers have vowed to ensure the expansion reaches that level. The economy has so far maintained that pace, but a full-year expansion at 7% would still be the worst performance in more than two decades.

Chinese Premier Li Keqiang said on August 28, 2015 that the economy was showing signs of improvement after a series of measures to boost growth, though he said the government still needed to do more to ensure that growth didn’t come up short.

So far China has slashed interest rates five times since November and made repeated moves to let banks lend more of their deposits. It has also offered tax breaks for businesses and accelerated approvals for infrastructure projects.

But weak demand at home and abroad have confounded Beijing’s efforts. Exports slumped 8.3% in July and were down nearly 1% for the first seven months of the year compared with last year. Imports slid 8.1% in July and have dropped for nine consecutive months, partly due to a fall in demand at home.

Last month, China’s central bank devalued the national currency by 2%, and it has let the currency slip further since. It hopes the weaker currency will give the nation’s exports a bit of a boost by making Chinese goods a little bit cheaper in foreign markets.

The government said that weather as well as factory shutdowns in and around Beijing were to blame for some of the manufacturing weakness during the month. It said that efforts to limit air pollution in the cities of Beijing and Tianjin and neighbouring Hebei province in north China had slowed production, and that the PMI in this region was lower than the national level. The government plans a huge military parade, which has been interpreted as an effort to demonstrate its military and political prowess.

Analysts said that the weakness in the nonmanufacturing measure probably reflected disruptions to the financial sector that followed a steep slide in stock prices in June and July.

Meanwhile, the final Caixin Manufacturing Purchasing Managers’ index came in at a more than a six-year low of 47.3 in August from 47.8 in July, according to publisher Caixin Media Co. and research firm Markit, which compile that index. The reading was better than the preliminary level of 47.1 issued late last month but remained at a 77-month low.

The Caixin China services purchasing managers’ index showing sluggishness outside the factory sector with the slowest increase in 13 months. It fell to 51.5 in August, from 53.8 in July.

www.wsj.com


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