Have supply chain problems and coronavirus placed further pressure on China’s factory sector?
July was a rough month for China’s economy and August has looked just as bad, if not worse. This week, investors’ eyes are trained on the first big economic indicator for the month in the form of the country’s official manufacturing purchasing managers’ index.
July’s manufacturing reading came in at just 50.4, barely above the 50-point threshold separating growth from contraction. August has brought a new string of disruptions, including lockdowns to contain outbreaks of the Delta coronavirus variant, which have interrupted supply chains and forced the partial closure of a Chinese port. Severe flooding has also disrupted production.
July’s readings were already enough for many economists to lower their forecasts for China’s annual economic growth, with imports of key commodities falling, while retail sales growth, credit growth and industrial production all slowed markedly. A poor showing in August could further dampen expectations and depress enthusiasm for Chinese assets.