The latest data shows that the official manufacturing PMI dipped to 49.1 in August, the lowest in six months, due to weaker demand. Industrial production growth likely slowed to 4% y/y, while export growth saw an uptick. Policy measures supported equipment investment and retail sales, but PPI deflation may have worsened while CPI inflation picked up, according to analysts at Standard Chartered.
Analysis of Economic Indicators
The manufacturing PMI dropped to 49.1 in August, signaling a decline in new orders and production. Industrial production growth is expected to have decreased to 4% y/y, although export demand remained steady. The services PMI improved slightly to 50.2, driven by certain sectors like transport and entertainment, while retail sales growth is likely to have rebounded to 4% y/y. Fixed asset investment remained stable, with resilient equipment investment but weak infrastructure and real estate sectors.
CPI inflation is projected to have increased to 0.6% y/y, driven by higher prices of pork and vegetables. On the other hand, PPI deflation intensified to 1.4% y/y, attributed to lower metal and construction material prices. Total social financing growth is expected to stay at 8.2% y/y due to a recovery in new loans and government bond issuance.
Financial Implications
The softer growth momentum in August suggests a challenging economic environment, with potential impacts on investment decisions and consumer spending. Rising CPI inflation could lead to higher prices for essential goods, affecting household budgets. PPI deflation may indicate reduced profitability for businesses, while stable social financing growth points to ongoing support for economic activities.