China’s latest economic indicators point to a deepening slowdown, reinforcing expectations that Beijing will roll out more stimulus measures to support growth in the second half of 2019.
The country’s official manufacturing purchasing managers’ index (PMI) released Monday fell to 49.7 in July from 50.1 in June, marking the first contraction in the sector since December 2018. A reading below 50 indicates a contraction in activity.
The Caixin/Markit manufacturing PMI, a private survey that focuses more on small and medium-sized enterprises, also dropped to 49.9 in July from 50.4 in June, the lowest level since January 2016.
The weak readings follow a string of disappointing economic data in recent months, including a sharp decline in exports and a slowdown in fixed-asset investment. The data have raised concerns that the world’s second-largest economy is losing momentum amid a trade war with the United States and slowing global growth.
Analysts expect Beijing to respond to the weak data with additional stimulus measures, including tax cuts, infrastructure spending and monetary easing. The People’s Bank of China (PBOC) has already cut banks’ reserve requirement ratio twice this year, freeing up more funds for lending.
The government is also considering issuing special bonds to fund infrastructure projects, according to Bloomberg News. The move would mark a shift from the government’s previous focus on deleveraging the economy.
Analysts say that the stimulus measures are likely to provide a short-term boost to growth, but they warn that they could also add to the country’s already high debt levels.
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