China: Economic outlook remains discouraging – UOB

Economist at UOB Group Ho Woei Chen, CFA, assesses the latest set of data releases in the Chinese economy.

Key Takeaways

The Jul official PMIs painted a weaker outlook for China’s economy with risks continued to be biased to the downside. 

The non-manufacturing PMI eased off sharply in signs that the consumption-led recovery has continued to lose steam rapidly. The manufacturing PMI improved from Jun but registered its fourth straight month of contraction (reading below 50). 

The disinflationary pressure appeared to have eased in Jul for both the manufacturing and non-manufacturing sectors with input prices and output prices picking up but business margins could remain under pressure given that costs are rising faster. 

The sharper-than-expected slowdown in the non-manufacturing sector will prompt policymakers to announce stronger and more concrete fiscal stimulus measures to boost consumption.