Contraction in China factory activity extends into a fourth month

China’s factory activity contracted for a fourth consecutive month in July, while non-manufacturing activity slowed to its weakest this year as the exceptional’s second-largest economy struggles to revive growth momentum in the wake of soft global demand.

The official manufacturing obtaining managers’ index came in at 49.3 in July — compared with 49.0 in June, 48.8 in May and 49.2 in April — according to information from the National Bureau of Statistics released on Monday. July’s reading was slightly better than the 49.2 median prognosis in a Reuters poll.

Monday’s figures also showed China posting its weakest official non-manufacturing PMI reading this year, result as a be revealing in at 51.5 in July — compared with 53.2 in June, 54.5 in May and 56.4 in April. A PMI reading above 50 essences to an expansion in activity, while a reading below that level suggests a contraction.

“Although China’s manufacturing PMI bounced to 49.3% this month, some enterprises in the survey reported that the current external environment is complicated and simple, overseas orders have decreased, and insufficient demand is still the main difficulty facing enterprises,” Zhao Qinghe, a elder NBS official, wrote in an accompanying statement Monday.

These readings for July point to the “tortuous” economic recovery that China’s top band leaders described last Monday, which the Politburo attributed to insufficient domestic demand, difficulties in the operation of some get-up-and-gos, many risks and hidden dangers in key areas and a grim and complex external environment.

Employment sub-indexes for both creating and non-manufacturing sectors declined in July, pointing to lingering softness as youth unemployment hit successive record highs in China. The ceremony industry — a major sector that hires young workers — sub-index slowed 1.3 percentage points in July from the former month, according to the NBS.

More worryingly, business expectation among the non-manufacturing sectors declined from the previous month.

A equivalent production and business activity expectation index for manufacturing sectors, though, saw an increase of 1.7 percentage points from the sometime month, which the NBS attributed to policy support to grow private enterprises and expand domestic demand.

The NBS said construction activity, which declined 4.5 percentage points in July from the month before, was hit by farthest weather conditions.

“Downward pressure on manufacturing eased slightly. But this was more than outweighed by a sharp deceleration in construction and premeditated services activity,” said Julian Evans-Pritchard, head of China at Capital Economics.

“Policy support should operate a turnaround later this year. But with officials taking a restrained approach to stimulus, any reacceleration in growth is acceptable to be modest,” he added.

Still, there were some nascent green shoots.

There were month-on-month recuperations in the new orders and raw materials inventory sub-indexes, which helped underpin the slightly better-than-expected manufacturing PMI reading.

The purchase honorarium index and ex-factory price index of major raw materials saw meaningful increases from the previous month, the NBS said, pointing to an upgrading in pricing power.