Joe Cash
BEIJING (Reuters) – China’s manufacturing activity likely shrank for a second straight month in June, a Reuters poll showed on Thursday, fueling calls for new stimulus measures after a series of recent indicators showed the economy struggled to return to normal. Still high.
The official Purchasing Managers’ Index (PMI) is forecast at 49.5, unchanged from April, according to the median forecast of 19 economists participating in the survey. A score of 50 is the standard that distinguishes growth and contraction in economic activity.
In the poll, Deutsche Bank’s highest forecast was 50.0, while Societe Generale’s lowest forecast was 49.1.
The PMI is a sentiment-based survey that sometimes paints a gloomier picture of the economy than some of the more difficult data, but disappointing industrial output and profit data for May showed factory owners have good reason to be concerned.
China’s May exports exceeded expectations, showing manufacturers are trying to find overseas buyers, but experts say the jury is still out on whether export sales are sustainable. Not least because of growing trade tensions between Beijing on the one hand and Washington and Brussels on the other.
Meanwhile, the protracted real estate crisis continues to weigh on domestic demand.
Retail sales beat expectations last month but were boosted by a five-day public holiday, while public sector investment rose just 0.1% between January and May, reflecting weak consumer and investor confidence.
Analysts expect that China will introduce more policy support measures in the short term, and the government’s commitment to strengthen fiscal stimulus will help accelerate the growth of domestic consumption.
Julian Evans-Pritchard, head of China economics at Capital Economics, said policy support and strong exports should help the $18.6 trillion economy grow 5.5% this year. However, he warned that he was “not optimistic about the medium-term prospects.”
Officials are under pressure to launch a new growth engine to reduce the economy’s reliance on real estate, a goal that objective analysts say may be incompatible with a goal of keeping growth steady at around 5% this year.
Chinese Premier Li Qiang told delegates at the World Economic Forum meeting in the northeastern city of Dalian on Tuesday that the rapid growth of emerging industries has strongly supported the healthy development of the economy.
Li added: “Since the beginning of this year, China’s economy has continued to maintain a good trend… It is expected to continue to improve steadily in the second quarter.”
The official purchasing managers’ index will be released on Sunday. The private sector Caixin factory survey will be released on July 1, and analysts expect the reading to drop slightly to 51.2 from 51.7.
