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ECONOMY
Weekly Watch> WEEKLY WATCH NO. 32, 2011> ECONOMY
UPDATED: August 5, 2011 NO. 32 AUGUST 11, 2011
Manufacturing Withers
Share

The purchasing managers index (PMI), a barometer of manufacturing activities, stood at a 29-month low of 50.7 percent in July, down 0.2 percentage points from June, said the China Federation of Logistics and Purchasing (CFLP).

It was the fourth consecutive month of decline for the index. But it still marked the 29th straight month in which the index was above the boom-and-bust line of 50 percent. A reading above 50 percent indicates economic expansion.

The new orders sub-index, an effective gauge of domestic demand, stood at 51.1 percent in July, up from 50.8 percent last month. The input prices sub-index, a measure of how much factories pay for raw materials and other intermediary goods, slowed to 56.3 percent, compared with 56.7 percent in June.

"The real economy is losing some strength as enterprises continue destocking," said Wang Jun, a researcher with the China Center for International Economic Exchanges. "But shrinking manufacturing is less likely as the country accelerates construction of affordable homes."

"Growth is truly undergoing a correction," said Zhang Liqun, a researcher with the Development Research Center of the State Council. "An economic slowdown is inevitable and reasonable as the country rebalances the economy."

China needs to closely monitor the trends in consumption, investments and export, as well as changes in inventories, in order to keep the economy on a stable path, said Zhang.

"We believe China has successfully avoided an economic hard landing," said Nigel Chalk, IMF's mission chief for China. "But rapidly rising food prices, a possible real estate bubble and a decline in credit quality are all potential risks that could impede China's growth."



 
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