According to a survey conducted by 15 domestic and foreign financial institutions, the demand in China remains weak, resulting in a contraction in manufacturing activities among enterprises in August. Most economists predict that in August, the growth rate of industrial value added year-on-year may decrease compared to July, with an average forecast of 4.7%, which is 0.4 percentage points lower than the previous value.
The Purchasing Managers’ Index (PMI) for the manufacturing industry in China released by the National Bureau of Statistics of China dropped by 0.3 percentage points to 49.1 in August, falling below the contraction zone of 50 and reaching its lowest level since July 2023. Analysts from CITIC Securities macro team mentioned that the August manufacturing PMI was 1.8 percentage points lower than the seasonal average over the past five years, indicating that the contraction in manufacturing enterprise production activities in August was due to factors such as the traditional off-season of production, insufficient domestic effective demand, and extreme weather conditions in certain regions. High-frequency data also suggest a cooling trend in industrial production, with the year-on-year growth rate of industrial value added in August dropping to around 4.5%.
Wen Bin, Chief Economist of Minsheng Bank, expects that the month-on-month growth rate of industrial value added in August will slow down, with the year-on-year growth rate falling to around 4.7%. He cited data showing that aside from the chemical industry, overall capacity utilization was weak: the average capacity utilization rates for all-steel tires and semi-steel tires both saw slight decreases in August, blast furnace utilization dropped to the lowest level since April, and rebar utilization fell to the lowest level since March, while methanol, PTA, and PX utilization rates saw some recovery.
Economists’ average forecast for the year-on-year growth rate of total social retail sales of consumer goods in August is 2.7%, remaining stable compared to the previous value. Seven institutions predict a decline in consumer retail sales growth, while the remaining eight believe it may stay the same or increase compared to the previous value.
华泰证券首席宏观经济学家易峘 believes that in August, the summer travel season continued to be lively, but overall showed a trend of “increased quantity and decreased price,” with an average 10.7% year-on-year decrease in domestic flight ticket prices. Box office sales during the summer season from August 1 to 25 were also lower compared to the same period in 2023, shrinking by nearly half. However, there was a slight improvement in automobile sales, while the year-on-year growth rate of online retail sales of goods might decline.
CITIC Securities macro team stated that due to the marginal decrease in residents’ income, the service industry consumption may continue to exhibit a weak trend.
Overall, 14 institutions predict that the cumulative year-on-year growth rate of fixed asset investment from January to August 2024 will be 3.5% on average, a decrease of 0.1 percentage points from the previous value.
Nomura’s Chief Economist for China, Lu Ting, predicts that the cumulative year-on-year growth rate from January to August will remain at 3.6%, with a widening decrease of 11.9% in investment in real estate in August. New home sales remained sluggish in August, with sales volumes in the 20 major cities covered by Wind shrinking compared to 2019, indicating that the new round of real estate easing measures failed to stop the decline in the real estate market.
Both domestic and external demand are weak. The average forecast for the year-on-year growth rate of exports in August by the 15 institutions is 6.2%, 0.8 percentage points lower than the previous value, with 11 institutions believing that exports will weaken further. Economists generally expect a decrease in the year-on-year growth rate of imports, with a 5.3 percentage point decrease from the previous value, and a forecasted trade surplus of $82.21 billion, a decrease of $2.44 billion from July.
Huachuang Securities’ Chief Macro Analyst Zhang Yu predicts: “Weaker external demand may affect volume, downward pressure on prices may drag, and overall export will face pressure.” Zhang Yu believes that with weak domestic demand, declining commodity prices, and changes in the base effect, the year-on-year growth rate of imports in August is expected to drop to 0.5%.
The data released by the National Bureau of Statistics of China on September 9th for the Consumer Price Index (CPI) and Producer Price Index (PPI) in August also show that domestic demand remains weak.
The CPI in August increased by 0.6% year-on-year, accelerating by 0.1 percentage points compared to July, mainly driven by food prices. Excluding the more volatile food and energy costs, the core CPI rose by 0.3%, the lowest level since March 2021, indicating sustained weak demand and the need to boost overall demand. Meanwhile, the PPI decreased by 1.8% year-on-year, expanding by 1.0 percentage points, reaching its lowest level in nearly four months. The data indicates that internal demand in China remains weak, and deflationary pressures continue to intensify.
Michelle Lam, Chief Economist for Greater China at Societe Generale SA, stated, “The deflationary pressure in China is becoming more deeply rooted.”