China’s factory activity unexpectedly shrank in July amid COVID outbreak

* China July lower than official manufacturing PMI forecast

* July Official Services PMI grows slowly

* COVID flare-up, cooling of global demand, asset major risks

*Large stimulus unlikely, government not to mention growth target (non-manufacturing and overall PMI, adds background)

BEIJING, July 31 (Reuters) – China’s factory activity unexpectedly shrank in July after bouncing back from COVID-19 lockdowns earlier in the month, amid fresh virus flare-ups and a deepening global outlook weighing on demand, a report on Sunday said. Shown in the official survey.

The National Bureau of Statistics (NBS) said on Sunday that the official Manufacturing Purchasing Managers’ Index (PMI) stood at 49 in July, up from 50.2 in June.

Analysts polled by Reuters had expected it to improve to 50.4, a modest improvement but still well above the 50-mark mark that separates contraction from growth on a monthly basis.

The official non-manufacturing PMI fell to 53.8 in July from 54.7 in June. The official composite PMI, which includes both manufacturing and service activity, stood at 52.5 versus 54.1.

China’s economy nearly shrank in the second quarter amid widespread lockdowns, but top leaders recently indicated that a strict zero-COVID policy would remain a top priority.

State media after a high-level meeting of the ruling Communist Party reported that policymakers are set to miss their GDP target for this year by “about 5.5%”.

Beijing’s decision to skip mentioning the growth target after the meeting has quelled speculation that it would implement massive stimulus measures, as it often did in previous recessions.

Capital Economics says China’s economic recovery is likely to be dragged further, with policy restraints, continued threats of more lockdowns and weak consumer confidence.

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faltering recovery

After a rebound in June, the recovery in the world’s second-largest economy has faltered as the nascent COVID flare-up led to tighter restrictions on activity in some cities, while the once-powerful property market moved from crisis to crisis.

Chinese manufacturers are still grappling with high raw material prices that are reducing profit margins, and fears of a global slowdown have clouded the export outlook.

China’s southern megacity Shenzhen has vowed to “mobilize all resources” to contain the slowly spreading COVID outbreak, ordering strict implementation of testing and temperature checks and a lockdown for COVID-hit buildings.

Earlier this month, the port city of Tianjin, home to factories linked to Boeing and Volkswagen, and other regions tightened restrictions to fight the new outbreak.

Lockdown measures had some effect on 41% of Chinese companies in July, according to World Economics, although its manufacturing business confidence index rose from 50.2 in June to 51.7 in July. (Reporting by Beijing Newsroom; Editing by Himani Sarkar) (([email protected];)) Keywords: China’s Economy/PMI (Update 1, PIX)

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