What started as a trickle is turning into a flood. A slew of disappointing data continued on Wednesday when an influential private survey on factory activity in China showed a distinct dip.
The influential Caixin/Markit Manufacturing Purchasing Managers’ Index, or PMI, declined to 50.8 last month from June’s 51.0, which was further evidence that the world’s second-largest economy is slowing down.
While it remained above the 50-point mark, which separates growth from contraction for the 14th consecutive month, the sub-indexes for output and new orders cooled amid escalating trade tensions with the United States.
“The reading has not been this low since November 2017,” Zhengsheng Zhong, the director of Macroeconomic Analysis at CEBM Group, said in a note accompanying the survey.
“The sub-indexes for output and new orders both fell, but remained in expansionary territory, while the employment sub-index picked up despite remaining in contractionary territory. New export orders shrunk at the fastest pace since June 2016, indicating the export market continued to deteriorate.”
To illustrate the last point, new export orders contracted to 48.4 in July. This was the fourth consecutive month of shrinking orders.
Indeed, the weak trend for export orders has been compounded by the trade dispute with the US and tit-for-tat tariffs, with Washington threatening to impose duties on all Chinese imports, worth close to US$500 billion.
The Caixin survey is also broadly in line with the official PMI, which was released by the National Bureau of Statistics earlier this week, and showed that factory activity slipped to 51.2 last month, from June’s 51.5.
“We must do a good job in stabilizing employment, finance, foreign trade and investment and expectations,” Xinhua said, citing a statement released after a meeting of ruling Communist Party’s Politburo, which was chaired by President Xi Jinping. “We must seize the main contradictions and take targeted measures to solve them,” it said.