By Gina Lee
Investing.com – Chinese factory activity saw its expansion slow down slightly in August, whilst the services industry was at its strongest level since early 2018.
The National Bureau of Statistics (NBS) said that August’s non-manufacturing Purchasing Managers’ Index (PMI) rose to 55.2, higher than July’s reading of 54.2, in August. It also said that the manufacturing PMI slipped to 51 in the same month, lower than July’s 51.1 figure and the forecasted 51.2 prepared by Investing.com.
“The recovery of demand is slower than that of production, which is starting to drag on the economic recovery,” the China Logistics Information Center said in a statement.
“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, the statement added.
The lack of demand remains a hurdle to recovery, with firms suffering even with new orders rising to 52 and new export orders increasing to 49.1.
The weather also played a role in the dip in factory activity.
“Some companies in Chongqing and Sichuan reported an impact from heavy rains and floods, resulting in a prolonged procurement cycle for raw materials, reduced orders and a pullback in factory production,” NBS senior statistician Zhao Qinghe said I a separate statement.
Some investors remained optimistic following the data’s release.
Commerzbank AG (OTC:CRZBY) economist Zhou Hao said that the better-than-expected PMI for the services sector indicated the start of its recovery after being hit harder by COVID-19. The softer manufacturing data suggests “the momentum in the industrial sector has been stabilizing amid the post COVID-19 recovery,” he added.
Chang Shu of Bloomberg Economics also remained cautiously optimistic.
“Looking ahead, we expect the recovery to continue to make headway, propelled by incremental increases in domestic demand and further opening of overseas economies. “
“That said, returning to pre-pandemic growth rates anytime soon would be a tall order,” he warned.
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