China’s August PMI drops to nine-month low

Beijing, China (4E) – China’s manufacturing activity dropped to its slowest pace in nine months during the month of August, indicating that the world’s second biggest economy is continuing its trend to slower economic growth.

The National Bureau of Statistics and China Federation of Logistics and Purchasing announced on Friday that the Purchasing Managers Index (PMI) declined to 49.2 in August, which is lower to the 50.1 recorded in July.

An index reading below 50 indicates contraction in factory output while that above 50 suggests expansion.

Some economists believe that four straight months of declining PMI could mean that China’s economy has not yet bottomed out, adding to fears of a hard landing or dramatic and continuous slump. ANZ Banking Group Ltd. has already reduced its outlook for China’s full-year growth after the report was released.

The latest data may add more pressure to Beijing to act and control the pace of the slowdown ahead of the changes in the Communist Party leadership in the months ahead. China is facing a number of hurdles overseas including high unemployment in the euro zone and stagnant labor market in the U.S., resulting to lower corporate earnings by export firms and higher bad debt incurred by local banks. Likewise, restrictions in the country’s real estate market saw investment in the industry go down.

The contraction may also be felt more visibly by China’s middle class, who will feel the financial pinch as the threat of layoffs and lower wages looms. It is also expected that more Chinese will consume less and less of good and services.

Economic growth in the three months ending June was recorded at 7.6 per cent, while very high compared to other developed countries it is quite low by Beijing’s standards. It was in fact the lowest GDP growth registered in three years.

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