China’s factory output shrank more than expected in July, official data showed on Thursday, logging its fourth straight month of contraction as Beijing battles to hammer out a trade deal with the United States.
The Purchasing Managers’ Index — a key measure of industrial output — came in at 49.3, the National Bureau of Statistics (NBS) said, down from 49.7 in June and significantly off the 50-point mark separating growth and contraction.
A Bloomberg analysts’ poll had forecast the index would be the same as in June.
“The manufacturing sector’s business climate sank lower compared to the previous month,” NBS statistician Zhao Qinghe said.
The decline was “driven by factors such as the industry’s traditional slack period as well as high temperatures, heavy rains and floods in some areas”, Zhao said.
China has struggled to maintain a strong economic recovery since the pandemic, as it fights a debt crisis in the crucial property sector, chronically low consumption and elevated youth unemployment.
A spate of natural disasters has also hit the country this summer, with at least 48 people killed and tens of thousands evacuated this week as northern China endured some of its worst floods in years.
“While the statistics bureau partly attributed the decline to weather-related disruptions to production, the breakdown suggests that demand has softened too,” Zichun Huang, China economist at Capital Economics, said.
“The new export orders index dropped back as high tariffs began to weigh again,” Huang added.
“More of the current weakness in demand appears to be domestic in nature,” she said.
China’s bruising trade war with the United States — now on hold pending a deal — has hit the export-dependent economy.
Beijing and Washington called a 90-day truce on the staggeringly high duties in May, and held two days of talks this week aimed at avoiding their reimposition on August 12.
Despite signs that both sides want to extend that deadline, the negotiations ended without an agreement.
