China: Manufacturing PMI eases in August; services PMI plunges
August 31, 2021
The National Bureau of Statistics' Manufacturing Purchasing Managers' Index (PMI) came in at 50.1 in August, down from July's 50.4. August's result marked the weakest reading since February 2020. Consequently, the index remained above the 50-threshold, but pointed to a moderating improvement in business conditions from the previous month.
The headline print reflected deteriorations in output and new orders, and was a result of a lower PMI reading for large firms, as the PMIs for small- and medium-sized firms increased. Meanwhile, the Caixin Manufacturing PMI fell from 50.3 to 49.2, while the National Bureau of Statistics’ non-manufacturing PMI fell from 53.3 in July to 47.5 in August. The across-the-board deterioration in the PMIs is the result of a range of factors. The flare-up in Covid-19 cases at home was an important driver, due to the impact on consumer confidence, and ensuing localized restrictions and supply disruptions. Global supply constraints, domestic flooding and the authorities’ regulatory clampdown on a range of sectors were likely also to blame.
On the near-term outlook, analysts at Nomura stated:
“The official non-manufacturing PMI may make a material rebound to around 52 in September from 47.5 in August, thanks to the lifting of restrictions as China appears to have contained the latest wave of Covid-19 (the De?lta variant). However, given China’s zero-tolerance Covid strategy and the potential for much more infectious variants of Covid-19, the services sector could be hit again in coming months. However, the official manufacturing PMI could remain at around 50.0 in September, as the success in containing the latest wave of Covid-19 and the post-storm recovery might be offset by Beijing’s property-related tightening measures. Beijing’s regulatory crackdown could also inflict some damage on private sector investment.”
Author: Oliver Reynolds, Economist