As the trade war with the United States continues to gather pace, manufacturers in China remain gloomy about their prospects, with the sector activity contracting for the fourth successive month in August. The Official NBS Manufacturing PMI in China dropped to 49.5 in August 2019 from 49.7 in the July 2019 of 49.7. The latest reading pointed to the fourth straight month of contraction in factory activity, amid growing trade frictions with the US and sluggish domestic demand. There were falls in new orders (49.7 vs 49.8 in July) and employment (46.9 vs 47.1), while output growth slowed (51.9 vs 52.1). Export orders were down for the 15th straight month (47.2 vs 46.9) while buying level declined at the steepest rate since February (49.3 vs 50.4). On the price front, input prices dropped the most in seven months (48.6 vs 50.7), while output charges fell for the fourth month in a row (46.7 vs 46.9). Looking ahead, business sentiment weakened to its lowest since January (53.3 vs 53.6). Business Confidence in China averaged 51.82 Index Points from 2005 until 2019, reaching an all-time high of 59.20 Index Points in April of 2008 and a record low of 38.80 Index Points in November of 2008.
That the index has remained in contractionary territory for six of eight months this year shows that the effects of US tariffs are resonating through the Chinese economy. The manufacturing PMI only showed expansion in March and April of this year. New and higher US tariffs scheduled to enter force on September 1, October 1 and December 15 could provide some very temporary boost to Chinese exports and therefore manufacturers, should they inspire American buyers to make early purchases to pay lower tariff rates. However the long term trajectory is negative, with many manufacturers scoping out or already relocating to production sites outside the world’s second largest economy.
| Month | NBS PMI | MoM |
| August | 49.5 | -0.2 |
| July | 49.7 | 0.3 |
| June | 49.4 | 0 |
| May | 49.4 | -0.7 |
| April | 50.1 | -0.4 |
| March | 50.5 | 1.3 |
| February | 49.2 | -0.3 |
| January | 49.5 | 0.1 |
| December | 49.4 | -0.6 |
| November | 50 | -0.2 |
| October | 50.2 | -0.6 |
| September | 50.8 | -0.5 |
| August | 51.3 | |
China Manufacturing Purchasing Managers Index provides an early indication each month of economic activities in the Chinese manufacturing sector. It is compiled by China Federation of Logistics & Purchasing (CFLP) and China Logistics Information Centre (CLIC), based on data collected by the National Bureau of Statistics (NBS).Li & Fung Research Centre is responsible for drafting and disseminating the English PMI report.
Source of information