China August factory activity seen growing at slightly slower pace

The official manufacturing Purchasing Manager’s Index (PMI) is expected to slip to 50.2 in August from 50.4 in July, a fifth month of slowing growth, according to the median forecast of 33 economists polled by Reuters. A reading above 50 indicates expansion from the previous month.

“With slowing growth momentum and dovish signals (from China’s central bank) we expect more easing, but still at a measured pace as policymakers eye headwinds in 2022.”

To bolster the economy, the People’s Bank of China (PBOC) in mid-July cut the amount of cash banks must hold as reserves, releasing around 1 trillion yuan ($6.47 trillion) in long-term liquidity.

Many analysts expect another cut later in the year.

China’s latest coronavirus outbreaks appear to have been largely brought under control, with zero locally transmitted cases reported on Aug 29., for the second day in a row.

But it spurred authorities across the country to impose counter-epidemic measures including mass testing for millions of people as well as travel restrictions of varying degrees and port shutdowns.

Higher raw material prices, especially of metals and semiconductors, have also pressured profits. Earnings at China’s industrial firms in July slowed for the fifth straight month.

The official PMI, which largely focuses on big and state-owned firms, and its sister survey on the services sector, will both be released on Tuesday.

The private Caixin manufacturing PMI will be published on Wednesday. Analysts expect the headline reading will slip to 50.2 from July’s 50.3.