Why China's factory activity has contracted for 5 consecutive months
What's the story
China's factory activity has witnessed a contraction for the fifth consecutive month, an official survey revealed today. The development comes despite a recent extension of the US-China trade truce by another 90 days. The National Bureau of Statistics (NBS) reported that China's Purchasing Managers Index (PMI) in the manufacturing sector rose slightly from July's 49.3 to August's 49.4, indicating a slower decline than before.
Index interpretation
Key indicators of manufacturing sector
The PMI is a key economic indicator that measures the performance of the manufacturing sector. It is calculated on a scale from zero to 100, with 50 being the dividing line between expansion and contraction. This month, indices for manufacturing, new orders, and raw material inventory all saw slight increases. However, the employment index did witness a minor decline during this period.
Economic pressures
Trade tensions continue to impact China
The survey results were released just weeks after US President Donald Trump announced a 90-day extension on sharp import duty hikes. However, uncertainties over tariffs on exports to the US still loom large over China's economy. These trade tensions add to existing pressures such as a downturn in the property sector and rising unemployment rates.
Natural challenges
Natural disasters exacerbate economic challenges
Adding to the economic woes, China has also been dealing with floods caused by torrential seasonal rains. These natural disasters have disrupted business activities in several parts of the country. Despite these challenges, Zhao Qinghe, a senior statistician at NBS, noted that the PMI for manufacturing and non-manufacturing sectors as well as overall PMI all grew in August.