On the brighter side, new orders reverted to expansion for the first time in five months and factory owners indicated that producer prices were improving for the first time in seven months, although the vast services sector continued to trend downwards. The official purchasing managers’ index (PMI) rose to 49.7 from 49.3 in July, according to the National Bureau of Statistics, staying below the 50-point level demarcating contraction from expansion. The reading was above a forecast of 49.4.
The PMI provides the first clue about how the world’s second-largest economy fared in August, following a torrid run of trade, factory and retail data in July. However, in a hopeful sign for growth, conditions did not materially worsen even though the survey showed factories under persistent pressure.
China’s major manufacturing rivals in the region Japan and South Korea also reported sharp declines in output on Thursday. “It’s too early to tell, but today’s print suggests that a sequential uptick in growth activity in the third quarter could still be possible,” said Louise Loo, senior economist with Oxford Economics.
The world’s second-largest economy risks missing Beijing’s annual growth target of around 5% as officials wrestle with a worsening property slump, weak consumer spending and tumbling credit growth, leading major banks to downgrade their growth forecasts for the year.
