China's manufacturing boom in August was rehabilitated in comparison with the previous month, but has not returned to expansion. Official data indicate that the manufacturing procurement manager index (PMI) in August was 49.8, higher than in July, and slightly better than market expectations, indicating that industrial activity is still contracting, albeit slowing down.
PMI is below 50 for two months in a row
PMI above 50 usually represents expansion, and below 50 means contraction. Although the monthly figures rose, for the second month in a row, they were below the dry line, reflecting the continued instability of manufacturing demand and production rehabilitation.
This also suggests that the current downward pressure on the economy has not been significantly reduced. The August data were slightly better than the market had originally anticipated, but the overall view remained weak.
Domestic demand and property continue to drag
China ' s economic growth slowed to 4.3 per cent in the second quarter, the lowest level since the end of 2022. Weak domestic demand and the persistent decline in the real estate market continue to stifle overall economic activity.
After entering the second half of the year, the pressure became even more evident. Consumption spending has stagnated, urban investment has contracted and unemployment has risen. Retail sales and industrial value-added growth slowed in July, and the annual rate of increase in profits for industrial enterprises fell to a low level.
Export supports growth, but it's hard to survive.
Against the background of weak domestic demand, exports remained one of the few projects that supported growth this year. China’s demand for scientific and technological products has risen, driven by global AI investment in infrastructure, and has contributed to double-digit growth in exports for much of this year.
However, external demand is difficult to fully cope with the drag of the domestic slowdown. China ' s decision-making levels had previously indicated that new policy measures would be introduced in due course, noting that there was still room for further operation of fiscal spending and monetary easing, but economists generally expected that follow-up support might be relatively limited.