By Joe Cash
BEIJING (Reuters) – China’s factory activity likely contracted for a fourth straight month in July, a Reuters poll showed on Friday, reinforcing the need for further policy support to boost domestic demand amid a “tortuous” economic recovery.
The official purchasing managers’ index (PMI) is expected to have edged up to 49.2 in July, just a touch up from 49.0 in June, according to the median forecast of 21 economists in a Reuters poll.
An index reading above 50 indicates expansion in activity on a monthly basis while below that signals contraction. The highest forecast was a reading of 50.0 from Hwabao Trust, an investment firm.
The indicator last pointed to contraction for more than three months between May and October 2019, suggesting that sentiment among factory managers is currently even more subdued than during the pandemic.
The world’s second-largest economy grew at a frail pace in the second quarter as demand weakened at home and abroad, raising pressure on policymakers to deliver more stimulus to shore up post-COVID recovery.
China’s top leaders last week pledged to step up economic policy adjustments, focusing on expanding domestic demand, boosting confidence and tamping down on risks, the Politburo, a top decision-making body of the ruling Communist Party, said.
However, most analysts say policymakers are unlikely to deliver any aggressive stimulus due to fears of exacerbating growing debt risks.
Moreover, while state media last week quoted President Xi Jinping as saying that China will achieve its annual development targets, analysts warn the country could miss its modest 2023 growth target of around 5% for a second year in a row should the economy lose any more momentum.
On a year-on-year basis, gross domestic product expanded 6.3% in the second quarter, up from 4.5% in the first three months of the year, but well below the forecast for growth of 7.3%.
The official manufacturing PMI, which largely focuses on big and state-owned firms, and its survey for the services sector, will be released on Monday.
(Reporting by Joe Cash; Polling by Devayani Sathyan; Editing by Shri Navaratnam)
