China’s Manufacturing Sector Shrinks Again

Investing.com—China’s manufacturing sector shrank as expected in July, as indicated by purchasing managers index (PMI) data released on Wednesday. The sector has contracted for a third consecutive month due to weak domestic demand and limited support from Beijing.

The Manufacturing PMI fell to 49.4 in July, down from 49.5 the previous month. A reading below 50 signifies contraction, marking three months of shrinking manufacturing activity in China.

This decline was primarily driven by sluggish domestic demand, as consumer spending has weakened significantly amid diminishing confidence in economic recovery.

Additionally, new trade tariffs imposed by the European Union in July added pressure on manufacturing output, particularly affecting the electric vehicle industry, which had been a bright spot in the sector.

Thus far, Beijing has offered scant cues regarding planned stimulus measures to support growth. Despite surprise interest rate cuts by the People’s Bank of China that occurred earlier in July, they have done little to restore confidence.

Weakness in Chinese consumption also extends beyond manufacturing. The Non-Manufacturing PMI grew to 50.2 in July, in line with expectations but down from 50.5 in June. This contributed to a slowdown in China’s Composite PMI, which decreased to 50.2 from 50.5 the prior month.

The Chinese economy’s growth in the second quarter fell below expectations, leading to promises of more stimulus from Beijing, especially aimed at boosting consumption. However, the government has not provided clear signals on forthcoming measures, resulting in little confidence in the economy.