According to a Reuters poll, China’s industrial activity likely rose at the quickest rate in a year in July, as output in COVID-hit manufacturing areas restarted after emerging from lockdowns and supply chain disruptions eased.

According to the consensus expectation of 24 analysts surveyed by Reuters, the official manufacturing Purchasing Manager’s Index (PMI) would have increased to 50.4 in July, the highest in 12 months, from 50.2 the previous month.

A value over 50 implies growth from the previous month, while a reading below 50 suggests contraction.

Analysts say the world’s second-largest economy has recovered from tight and broad COVID lockdowns, thanks to increased domestic demand, fewer supply chain bottlenecks, and government stimulus measures.

“China’s manufacturing sector is shaking off the impact of COVID outbreaks in the second quarter and is accelerating to return to normal,” said Zhou Maohua, an analyst at China Everbright Bank to Reuters.

He noted that easing production cost pressures and government price stability initiatives successfully decreased industry production expenditure.

According to Capital Economics researchers, the economic recovery will grow more difficult as exports shift from tailwind to headwind and the property crisis develops.

The newest viral outbreaks have also placed a pall over the recovery’s pace, as have external problems like as the months-long Ukraine crisis and predictions of a worldwide recession.

State media claimed this week that policymakers are prepared to miss their GDP goal of “around 5.5 percent ” for this year. In contrast to prior statements that it would work hard to fulfill its 2022 growth objective, authorities will instead concentrate on getting the greatest outcomes this year. 

“The meeting reflects a more flexible and pragmatic attitude toward the GDP target,” said Bruce Pang, chief economist and head of research at Jones Lang Lasalle Inc to Reuters, adding that policy would concentrate on executing current initiatives and allowing them to take effect rather than introducing fresh stimulus.

He underlined that boosting domestic demand to sustain employment remained a strategic objective. The PMI’s employment components are still poor.

The official manufacturing PMI, which focuses on large and state-owned enterprises, and its services sector twin survey will be revealed on Sunday.

The Caixin manufacturing PMI for the private sector, which focuses on small enterprises and coastal areas, will be released on Monday. Analysts predict a headline reading of 51.5, down from 51.7 in June.

Source: Reuters

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