China’s non-manufacturing activity expanded at a slower pace this month, signaling slower domestic demand for services amid the country’s property crisis. On the other hand, manufacturing activity in July shrank for a third straight month, an official factory survey showed, raising expectations that Beijing will need to launch more stimulus.
According to the National Bureau of Statistics (NBS), China’s official non-manufacturing purchasing managers’ index (PMI), which includes services and construction, slowed to 50.2 from 50.5 in June.
Meanwhile, China’s manufacturing PMI fell to 49.4 in July from 49.5 in June, below the 50-mark separating growth from contraction. The sub-index for production declined to 50.1 in July from 50.6 in June, while the measure for new orders reached 49.3 in July, down from 49.5 in June, the NBS reported.
The NBS composite PMI in China, which includes manufacturing and services, recorded 50.2 in June.
Construction activity expands slower
Services related to railway transport, air transport, postal services, culture, sports and entertainment sectors saw rapid growth in July. Meanwhile, those related to retail, capital market services, and property sectors witnessed contractions.
The sub-index for the construction sector was 51.2 in July, down from 52.3 in June. NBS senior statistician Zhao Qinghe attributed the decline to several factors including heat waves, rainstorms and floods around the country, which disrupted the progress of construction projects.
Despite these declines, NBS data revealed that China’s manufacturing sector remained optimistic, with confidence standing at 53.1 in July, only slightly down from 54.4 in June.
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China’s economic outlook
The world’s second-largest economy grew much slower than expected in the second quarter, with the consumer sector a particular cause for concern. Retail sales growth declined to an 18-month low as deflationary pressures forced businesses to cut prices.
China’s property crisis has heavily impacted domestic consumption as falling property valuations left families struggling. Hence, 70 percent of household wealth in China is in the real estate sector. In addition, new home prices fell at their fastest pace in nine years in June. Therefore, analysts expect the government to implement another round of policy measures to support the property market.
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