China factory activity contracts for fifth straight month in August

China’s manufacturing activity declined for the fifth consecutive month in August, as revealed by an official survey on Thursday. This situation continues to exert pressure on authorities to deliver assistance in order to bolster economic growth, given the weak demand within the country and internationally.

On a more positive note, there was a return to expansion in new orders for the first time in five months. Additionally, factory owners noted an improvement in producer prices, marking the first positive change in seven months. However, it’s important to note that the extensive services sector continued its downward trend.

The official manufacturing purchasing managers’ index (PMI) — a key measure of factory output — came in at 49.7 in August, below the 50-point mark that separates expansion and contraction, according to the National Bureau of Statistics (NBS).

Still, the reading was slightly higher than the July reading and also beat forecasts. The non-manufacturing PMI, which includes activity in the construction and services sectors, fell to 51.0, from 51.5 in July, according to NBS data.

Lukewarm demand for exports, a slump in the property market and high rates of youth unemployment have raised concerns about the economic slowdown in China.

“The survey results show that insufficient market demand remains a major problem facing enterprises today,” NBS analyst Zhao Qinghe said in a statement.

“The foundations for the recovery and development of the manufacturing industry needs to be consolidated. “A string of weak indicators this year have ramped up pressure on authorities to introduce measures to kickstart growth in the world’s number two economy as the initial burst of activity in the first few months after the lifting of Covid rules fades.

In response leaders have announced a range of pledges aimed at various sectors, particularly the troubled property industry, but traders have been disappointed by a lack of detail or follow-through.

Many are now urging officials to unveil a “bazooka” of big spending similar to the $550 billion stimulus seen in 2008 during the global financial crisis. “Overall economic momentum remains weak and more policy support is needed to avoid a renewed slowdown later this year,” analysts at Capital Economics said in a research note.

Some Chinese state-owned banks will also soon lower interest rates on existing mortgages, although analysts anticipate home prices will show no growth this year.

The fresh moves came after a raft of measures aimed at reviving big-ticket purchases, notably of new-energy vehicles. Still, many analysts see only a slim chance for any drastic stimulus amid concerns over mounting debt risks.

China’s economy grew 6.3 percent in the second quarter, much weaker than the 7.1 percent predicted in an AFP survey of analysts, while leaders have set a target of around five percent for this year, which would be one of its worst in decades, outside of the Covid period.

The International Monetary Fund forecasts 5.2-percent growth in China’s GDP this year.