China’s major economic pillars wobbled in July with weakness in manufacturing and the all-important property sector, showing the pressure on a country that remains a drag on the struggling global economy.
Chinese manufacturing activity unexpectedly contracted in July, as Beijing’s stringent Covid-19 restrictions and weak demand undercut hopes for a more robust economic revival.
The official manufacturing purchasing managers index pulled back to 49.0 in July from 50.2 in June, China’s National Bureau of Statistics said Sunday. The result left the index below the 50 level that separates expansion from contraction and short of the median forecast of 50.3 among economists polled by The Wall Street Journal.
Meanwhile, a nascent two-month recovery in China’s home sales ended in July as a widespread mortgage revolt over concerns that ailing property developers wouldn’t be able to deliver still-unfinished apartments weighed on demand.
Sales at the country’s top 100 property developers fell a sharp 39.7% in July from the same period last year to the equivalent of $77.6 billion, or 523.14 billion yuan, according to data released Sunday by China Real Estate Information Corp., a Shanghai-based real-estate data provider. July sales were down 28.6% from June, ending a two-month recovery in month-to-month sales growth.
The results in manufacturing and real estate, itself accounting for one-third of China’s economy by some estimates, underscored how far the country remains from any semblance of postpandemic normalcy. Although local governments across China have grown more adept at controlling Covid-19 outbreaks swiftly and with fewer disruptions than in previous months, Beijing has reaffirmed its commitment to strict zero-Covid policies for the foreseeable future.
In mid-July, China reported that gross domestic product expanded at a meager 0.4% annual rate in the second quarter compared with a year earlier, its weakest growth rate in more than two years, highlighting the depth of the damage caused by stringent lockdowns. The poor showing has prompted top leaders to effectively acknowledge that the government’s official GDP target of roughly 5.5% growth in 2022 is now out of reach, barring a big stimulus push that Beijing has all but ruled out.
Separately on Sunday, China’s official non-manufacturing PMI fell to 53.8 in July from a reading of 54.7 in June, the statistics bureau said. The subindex measuring service-sector activity pulled back to 52.8 in July from 54.3 in June, while the subindex tracking construction activity rose to 59.2 from 56.6.