BEIJING (Reuters) – China’s factory activity likely remained in contraction for the fifth consecutive month in September, as weak domestic demand and rising global trade barriers continue to dog the world’s second-largest economy.
A Reuters poll of 22 economists estimated the official purchasing managers’ index (PMI) will come at 49.5, higher than August’s reading of 49.1, but below the 50-point threshold that separates growth from contraction in activity.
The mood in the manufacturing sector has been depressed for months by tumbling producer prices and dwindling orders.
In the latest pain point, China’s industrial profits plunged 17.8% in August year-on-year, the biggest decline this year and a sharp reversal from the 4.1% growth in July.
The continued downturn in factory activity highlights the need for bold stimulus efforts from the government, as policymakers face growing pressure to meet China’s 2024 growth target of around 5%.
After a shaky start to the second-half of the year, China’s economy continued to show weakness with recent data broadly missing expectations.
In an unusual September Politburo meeting focused on macroeconomic issues this week, China’s top leaders acknowledged the economy was facing “new problems” and called for fresh policies to more “forcefully” stimulate growth.
The meeting also urged efforts to stop the declines in the beleaguered property market and to deploy “necessary” fiscal spending.
These pledges came just two days after China unveiled its most aggressive stimulus package since the COVID-19 pandemic, a sign officials are growing increasingly anxious and keen to reverse the economic downturn.
The government is also expected to issue about 2 trillion yuan ($285.16 billion) of special sovereign bonds to support consumption and local government debt issues, Reuters reported on Thursday, echoing economists’ calls for more fiscal supports.
China’s economic recovery has relied heavily on export strength, but looming western trade curbs increasingly cloud the outlook.
The United States is set to implement steep tariff hikes on Chinese products, including electric vehicles (EVs), starting Friday, while the European Union is expected to make a final decision on potential EV tariffs soon.
The private sector Caixin PMI is forecast at 50.5, analysts polled by Reuters say.
The official and Caixin manufacturing PMIs will be released on Monday.
($1 = 7.0135 Chinese yuan)
(Reporting by Ethan Wang, Ellen Zhang and Ryan Woo; Polling by Anant Chandak and Susobhan Sarkar in Bangalore and Jing Wang in Shanghai; Editing by Sam Holmes)
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