BEIJING, China — Chinese factory activity weakened in
July to its lowest level since the start of the pandemic, data showed Saturday,
as manufacturing was impacted by slowing demand, weak exports and extreme
weather.
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The
Purchasing Managers' Index (PMI), a key gauge of manufacturing
activity in the world's second-largest economy, dropped to 50.4 in July from
June's 50.9, the National Bureau of Statistics said.
A PMI reading of over 50 indicates expansion, while below
that figure suggests contraction.
The reading appeared to be levelling out between April and
June, and July shows the first marked decline, making it the lowest PMI figure
since February 2020, analysts said.
While the figure was worse than many forecasts, it was still
above the 50-point mark that separates growth from contraction.
China's fragile economic recovery is threatened by a recent
resurgence of the
Delta variant of the coronavirus that is threatening to
dampen holiday consumption over the summer.
"On the whole, China's economy continues to maintain
expansion momentum, but the pace has slowed down," said NBS senior
statistician Zhao Qinghe.
"In July, some companies entered the equipment
maintenance period, which in addition to the impact of extreme weather such as
localised high temperatures, floods and natural disasters, (caused) relatively
weakened manufacturing growth compared to last month."
Although Zhao did not refer to specific extreme weather
events, deadly flooding in central Henan province caused over 70 deaths and
billions of yuan worth of damage this month. Henan is home to key Foxconn
plants that manufacture Apple iPhones.
Overall, export and import indices dropped this month, after
a major port closure in the first three weeks of June stifled international
trade at a key point in the global shipping network.
"The most alarming signal is the new export order
index, which (at 47.7 per cent) is at the lowest level since July last
year," said Zhiwei Zhang, chief economist at Pinpoint Asset Management in
a note.
"Exports have been a main growth driver this year. This
PMI data release makes me even more cautious about growth outlook in H2."
China's non-manufacturing PMI also slightly slowed by 0.2
percentage points to 53.2 this month, although it was still showing growth.
In particular, the construction industry was badly affected
by "unfavorable weather factors such as high temperatures and rain, floods
and disasters," said Zhao.
However, the service industry recovered slightly, with
expanded sectors including aviation, catering and accommodation.
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