BEIJING (Reuters) – China’s manufacturing output fell to a six-month low in August, an official factory survey showed on Saturday, raising expectations that policymakers will unveil new plans to provide more stimulus for households and less for infrastructure projects.
The official purchasing managers’ index (PMI) fell for a fourth straight month, from 49.4 in July to 49.1 in August, putting it below the 50 threshold between expansion and contraction and short of the median forecast of 49.5 in a Reuters poll.
In contrast, the PMI for the non-industrial sector, which also includes the services and construction sectors, rose from 50.2 to 50.3.
The world’s second-largest economy started the second half of the year on a shaky note, with disappointing export, price and bank credit indicators for July showing weaker demand.
The recovery that most analysts had expected after China lifted strict measures against the COVID-19 pandemic in 2022 has so far failed to materialize for the $19 trillion economy.
Last month, Beijing signaled it was willing to deviate from its playbook of pouring money into infrastructure projects. Analysts have broadly welcomed the support for consumer spending, but warn that other policy tools will have to be used if the government is to meet its annual growth target of around 5%.
There are some positive developments and retail sales are exceeding last month’s expectations.
However, there is no concrete information yet on how China plans to revive its 1.4 billion-person consumer market. So far, authorities have only promised to “focus on boosting consumption to increase domestic demand.”
Over the past three years, the sharp decline in the real estate sector has had a major impact on consumer spending.
With 70% of household wealth tied up in real estate, representing a quarter of the economy at its peak, consumers are keeping a tight rein on their wallets.
There is little sign that policies aimed at restoring confidence are having the desired effect, with new home prices in China falling at their fastest pace in nine years in July.
A Reuters poll on Friday showed that house prices will fall 8.5% in 2024, more than the 5.0% drop forecast in May.
(Reporting by Joe Cash; Editing by Himani Sarkar and William Mallard)
