Beijing: Chinese factory activity weakened in July to the lowest level since the beginning of the pandemic, data showed on Saturday, because manufacturing was influenced by a slowdown in demand, weak exports and extreme weather.
The Manager Purchase Index (PMI), the key measure of manufacturing activities in the second largest economy in the world, fell to 50.4 in July from June 50, the National Statistics Bureau said.
PMI readings of more than 50 showed expansion, while below the number showed a contraction.
The reading seemed to increase between April and June, and July showed a decline marked first, making it the lowest PMI number since February 2020, analysts said.
While the numbers are worse than many estimates, it is still above the sign of 50 points that separate growth from contractions.
The fragile Chinese economic recovery was threatened by a recent resurrection from the Delta variant of Coronavirus who threatened to reduce holiday consumption during the summer.
“Overall, China’s economy continues to maintain the momentum of expansion, but the move has slowed,” Senior NBS statistics said Zhao Qinghe.
“In July, several companies entered the maintenance period of equipment, which in addition to extreme weather impacts such as local high temperatures, floods and natural disasters, (caused) manufacturing growth which was relatively weaker than last month.” Although Zhao did not refer to specific extreme weather events, deadly floods in Henan Province caused more than 70 deaths and billions of Damage Yuan this month.
Henan is home to a key Foxconn plant that produces an Apple iPhone.
Overall, the export and import index fell this month, after the closing of the main port in the first three weeks of June afflicted international trade at a key point in a global delivery network.
“The most worrying signal is the new export orders index, which (at 47.7 percent) was at the lowest level since July last year,” said Zhiwei Zhang, chief economist at Pinpoint asset management in a note.
“Exports have become the driver of the main growth this year.
The release of this PMI data makes me more careful about the view of growth in H2.” China’s non-manufacturing PMI also slowed down 0.2 percentage points to 53.2 this month, even though it still showed growth.
In particular, the construction industry is influenced by “unfavorable weather factors such as high temperatures and rain, floods and disasters”, said Zhao.
However, the service industry is a bit recovering, with the expanded sectors including flights, catering and accommodation.