China factory activity contracts in August - Caixin
Factory activity in China shrank in August as power cuts and Covid-19 curbs impacted production, according to data released on Thursday.
The Caixin manufacturing purchasing managers’ index fell to 49.5 from 50.4 in July. This was below consensus expectations of 50.0, which is the level that separates contraction from expansion.
Pantheon Macroeconomics said the weaker-than-expected PMI reading, particularly after the upside surprise from the official survey, suggests China’s private sector is under more pressure than its state-backed counterpart, given the differences in survey samples.
Chief China+ economist Craig Botham said: "We think it is also possible that the disruption to supply chains from the recent energy shortages - particularly for NEVs (new energy vehicles) - ended up having a greater impact on the private sector than the state, in aggregate, given the latter also consists of energy and mining companies, who would have benefitted from increased demand as a result of the hydropower problems.
"Firms also reported some ongoing disruption from Covid outbreaks, and the attendant restrictions.
"Output, new orders, and new export orders all fell in August, below 50 in the case of the latter two for the first time since May. The impact of the power cuts, however, was evident in the rising backlogs of work, which climbed to 50.0 from 49.1, and provides some hope of a small recovery bounce for output in September. Firms also continued to shed jobs, in a sign of continued pessimism about the outlook.
"We think the Caixin survey should improve slightly next month, as the power supply problems fade, but we expect continued weakness of activity for the next quarter, given the longer-term challenges that remain."