China’s Economic Rebound Continued in August on Strong Services - Bloomberg

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Photographer: Qilai Shen/Bloomberg

Chinese economy activity continued to rebound in August, with a gauge of the services industry at the strongest level since early 2018 while the expansion in manufacturing activity slowed slightly.

• The non-manufacturing gauge rose to 55.2 from July’s 54.2, much stronger than the projected 54.2. A reading above 50 indicates conditions improved from a month earlier.
• The official manufacturing purchasing managers’ index moderated to 51 from 51.1 a month earlier, lower than the 51.2 median estimate of economists, data released by the National Bureau of Statistics showed Monday.

Key Insights

• China’s economy continued to recover from the slump in the first quarter, with government-led investment boosting demand and reopening of overseas economies buoying the export sector.
• Services industries are also picking up as the government eases virus control measures, with more sub-sectors such as cinemas reopened.
• The better-than-expected result for the services PMI shows this sector is starting to recover after being hit harder by Covid-19, according to Zhou Hao, an economist at Commerzbank AG in Singapore. The softer manufacturing data suggests “the momentum in the industrial sector has been stabilizing amid the post-Covid recovery,” he said.
• Heavy flooding in central and southern China temporarily disrupted some transport and production activities, but hasn’t had a major impact on the economy.
• Although demand for manufactured goods is improving, with new orders rising to 52 and new export orders increasing to 49.1, firms still are suffering from a lack of demand.
• “The recovery of demand is slower than that of production, which is starting to drag on the economic recovery,” China Logistics Information Center, which helped compile the data, wrote in a statement on its website. “More than half of companies still list the lack of market demand as the main difficulty” and that is making them cautious about expanding production further, according to the statement.

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• A sub-index of manufacturing employment trended higher to 49.4 from 49.3.
• A set of early indicators suggested China’s economy picked up speed in August, aided by a strong industrial sector and stock market, better business confidence and home and car sales.
• Small companies “still face many difficulties in production and operation”, including insufficient market demand and capital shortage, Zhao Qinghe, an NBS economist, said in a statement accompanying the data. The PMI for small manufacturers continued to decline, dropping to 47.7.

— With assistance by Sharon Chen, Lin Zhu, Miao Han, and Tomoko Sato

(Updates throughout.)

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China’s Economic Rebound Continued in August on Strong Services - Bloomberg
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