China factory activity falls on heatwave, property sector

China factory activity falls on heatwave, property sector

BEIJING China's factory activity fell in August due to new COVID infections, the worst heatwave in decades and an embattled property sector weighing on production, a survey showed on Wednesday.

The official manufacturing purchasing managers' index PMI rose to 49.4 in August from 49.0 in July, according to the National Bureau of Statistics NBS. The index was below the 50-point mark that separates contraction from growth but was higher than the 49.2 expected in a Reuters poll of analysts.

The sub-index for new orders increased by 0.7 point, while the employment sub-index went up by 0.3 point. The sub-index for supplier delivery times dropped by 0.6 point amid new COVID cases.

After a rebound in June after the reopening of COVID lockdowns, the survey shows little improvement in the world's second-biggest economy in August activity.

Analysts say there are few signs that Beijing will relax its zero-COVID policy because of tighter COVID restrictions in August from July.

As of Monday, 28 cities accounting for 15.7 per cent of China's GDP were under full or partial lockdowns or anti-viruses curbs, according to Nomura.

The extreme heat and drought caused some regions such as the southwestern province of Sichuan and neighbouring Chongqing to suspend industrial production to ensure residential power supply, disrupting operations of well-known manufacturers like Taiwan's Foxconn and the battery giant CATL.

Some construction work was suspended due to the heat, dragging down the official non-manufacturing PMI in August to 52.6 from 53.8 in July.

The official PMI, which combines manufacturing and services, fell to 51.7 from 52.5 a month ago.

China's economy fell sharply in the second quarter as widespread COVID 19 lock downs hammered demand and business activity, while the property market was lurched from crisis to crisis.

The central government gave a boost to policy financing tools, and increased the quota on policy financing tools by 300 billion yuan $43.37 billion. The central bank also cut benchmark lending rates and lowered the mortgage reference by a bigger margin to boost the economy.

The rising domestic consumer inflation weighed on policy easing steps as youth unemployment climbed to a record high and rising domestic consumer inflation weighed on further policy easing measures.

Economists warn of weakening external demand that may hinder China's exports, which helped boost growth in the first half of the year, making up for sluggish consumption.