Chinese Factory Activity Growth Slows In August

The factory activity expanded at a slightly slower pace in August, missing analysts' expectations, dragged lower by disruptions from floods and adding to risks for the world's second-largest economy as it emerges from the coronavirus shock.

The official manufacturing Purchasing Manager's Index (PMI) fell slightly to 51 in August from 51.1 in July, but remained above the 50-point mark that separates growth from contraction on a monthly basis.

Analysts had expected it to pick up slightly to 51.2.

Zhao Qinghe, a senior statistician at the National Bureau of Statistics (NBS), said heavy rains and floods had hit the business and production of companies in Sichuan and southwestern China.

Nomura economists had warned earlier this month that while there was likely to be strong recovery among high-tech industries in August, resurgent flooding in mid-August "could impact both production and demand along the Yangtze River".

Zhao said that demand was continuing to recover and exports are "gradually improving".

"Business expectations have improved and corporate confidence has increased," he said.

The mainland's vast industrial sector is steadily returning to the levels seen before the pandemic paralysed huge swathes of the economy, as pent-up demand, stimulus-driven infrastructure expansion and surprisingly resilient exports propel a recovery, but the recovery remains uneven.

Private consumption has been stubbornly weak, with Chinese consumers turning cautious on purchases of everyday items as the Covid-19 pandemic cuts incomes and threatens millions of jobs. (Reuters, AFP)

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