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Economic news
31.07.2024

Business activity in China's manufacturing sector continued to contract in July

Data released by Caixin/S&P Global showed that China's manufacturing activity contracted again in July (for the third month in a row), but was slightly higher than forecasts. Meanwhile, activity in the service sector also declined, confirming consensus estimates.

Manufacturing PMI fell in July to 49.4 points (the lowest value since February) from 49.5 points in June. Economists had expected a drop to 49.3 points. A value below 50 points indicates a reduction in activity in the sector. Pressure on the index was exerted by a decrease in such components as new orders (to 49.3 from 49.5 in June), foreign sales (to 48.5 from 48.3), buying levels (to 48.8 from 48.1) and employment (to 48.3 from 48.1).

Meanwhile, the non-manufacturing PMI fell to 50.2 points, as expected, from 50.5 points in June. While marking the 19th consecutive month of expansion in the service sector, the latest figure was the softest pace since November 2023. The drop in the index was mainly caused by a decrease in the new orders sub-index (to 45.7 from 46.7 in June) and the employment sub-index (to 45.5 from 45.8).

The world's second-largest economy grew much slower than expected in the second quarter, with the consumer sector becoming a particular cause for concern and retail sales growth slowing to an 18-month low. The decline in domestic consumption is closely related to the fall in real estate values, which makes families feel poorer, since 70% of household wealth is accounted for by real estate. Today, Chinese leaders signaled that the stimulus measures needed to reach this year's economic growth target will be directed at consumers, deviating from their usual playbook of pouring funds into infrastructure projects. However, they didn’t announce specific steps.

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