Asian stock markets are deemed to be shrouded by pessimism on Monday as the newly released Chinese economic indicator casts gloom and fears on the sustainable growth of global economy despite last week’s rally on Wall Street in the face of determined policy tightening by global central banks.
China’s official manufacturing purchasing manager’s index (PMI) which measures factory activity, the latest figure registered an expected decline in July after bouncing back from Covid-19 lockdowns the month before, as fresh virus flare-ups and a darkening global outlook weighed on demand.
According to the National Bureau of Statistics (NBS), PMI fell to 49.0 in July from 50.2 in June, below the 50-point mark that separates contraction from growth.
The latest PMI print was the lowest in three months, with sub-indexes for output, new orders and employment all shrinking.
“The level of economic prosperity in China has fallen, the foundation for recovery still needs consolidation,” NBS senior statistician Zhao Qinghe was quoted as saying in a statement on the NBS website.
“Continued contraction in the oil, coal and metal smelting industries was one of the main factors pulling down the July manufacturing PMI,” he added.
Economists generally have attributed the weak demand has constrained recovery. Some may ever forewarn that third quarter growth may face greater challenges than expected, as recovery is slow and fragile.
As the export outlook remains uncertain with fears of a global recession, Chinese manufacturers continue to wrestle with high raw material prices, which are squeezing profit margins.
Policymakers in mainland China are prepared to miss their GDP target of 5.5% for year 2022, as the economy barely grew in the second quarter amid widespread Covid-curbs coupled with the fact that top leaders had set the tone that their strict zero-Covid policy would remain a top priority.
According to World Economics, the lockdown measures had some impact on 41% of Chinese companies in July, though its index of manufacturing business confidence rose significantly from 50.2 in June to 51.7 in July.
