In August, China's manufacturing activity fell to a six-month low, with factory prices falling and factory owners struggling to take orders, according to an official survey on Saturday. It is very difficult for the economy to recover without policymakers giving households more financial incentives.
The National Bureau of Statistics purchasing managers index (PMI) declined from 49.4 ⁇ in July to 49.1 ⁇ ; It made its sixth consecutive fall and fell below the 50 level separating growth from contraction in the fourth month. The Reuters poll also missed the median estimate of 49.5 ⁇ .
The statistics office said that the measurement of non-manufacturing activity in the construction and service sectors increased to 50,3 ⁇ under the influence of consumption during the summer holiday season. This is compared to a 50.1 ⁇ estimate and a 50.2 ⁇ July reading. The composite index remained at 50,1 ⁇ , that is, it counted economic activity in the country in August ⁇ . Following the below-expected 2Q2024 GDP data, it is clear that the cautious monetary and financial easing during the 3Q period does not solve the problems.
The world's second-largest economy began to lose momentum in July. Beijing's tactics of transferring funds to infrastructure projects, the classic method for stimulating the economy, no longer work. The government is therefore now signaling its readiness to announce new incentives for households.
Manufacturer confidence is bleak as the decades-long real estate crisis has stagnated domestic demand and Western restrictions on China's exports, such as electric vehicles, have spread from country to country.
A special survey on Sunday showed that new home prices in China rose at a slower pace than in July in August, with the crisis-affected real estate sector failing to reach bottom despite a number of supportive policies. According to the data of real estate researcher China Index Academy ⁇ , the average price of new houses in 100 cities compared to July %increased by 0.11; the previous month %It slowed down compared to the 0.13 ⁇ increase.
Producers reported that ex-factory prices fell from 46.3 ⁇ in July to 42 ⁇ , the worst in 14 months, while the new total and export orders sub-indices remained in the negative zone. Manufacturers have stopped hiring.
Zhiwei Zhang, chief economist at Pinpoint Asset Management, said the fiscal policy stance remains highly restrictive, which could be one of the reasons for weak economic momentum. In order to ensure economic stability, the fiscal policy stance needs to become much more supportive. While the U.S. economy is slowing, exports may not be as reliable a source of growth as they were in the first half of the year, he added.
On the positive side, retail sales were higher than forecasts last month. It seems that the authorities' decision to allocate about 150 billion yuan ($21 billion) in July for the renewal of old auto and durable consumer goods is in the right direction.
Yet economists expect more specific plans to revitalize China's 1.4 billion-dollar consumer market, beyond the commitment of the ruling Communist Party to do so. It won't be easy.
Xu Tianchen, senior economist at the Economist Intelligence Unit (EIU), said, "Given the scale of the stimulus plan, which he said would provide moderate support to the economy, I'm not sure if more (stimulus) can be implemented." Cash support for the renewal of aging goods ⁇ ⁇ seems to be welcomed by consumers ⁇ .
Moreover, unless more efforts are made to mitigate the collapse of the real estate sector, which has placed a heavy burden on consumer spending over the past three years, it will probably not be possible to stimulate domestic demand. 70 percent of household wealth is held in real estate, which in its heyday accounts for a quarter of the economy. Consumers will keep their wallets tightly closed before housing prices rise again.
A Reuters survey on Friday found that house prices are set for 2024. %He predicts a decline of 8.5; This is from the May poll. %It's deeper than a 5.0 drop.
Source of: Reuters, Bloomberg, CNBC.com
