For the first time in 16 months, the Caixin Manufacturing Purchasing Management Index (PMI), which measures economic perceptions of small and medium-sized private manufacturers in China, fell below the critical point.
In August, the manufacturing PMI dropped 1.1 points from 50.3, as reported by Caixin, a Chinese financial information provider, on the 1st. An index of 50 or higher indicates expansion in the Chinese manufacturing industry, and vice versa.
Since April last year, the Caixin Manufacturing PMI has not fallen below the critical 50 level since 49.4. PMI for August was below the consensus of 50.2.
Globally, the spread of Covid-19, and infectious diseases resurfacing in China, natural disasters, and the disappearance of the base effect have all had a negative effect on the economy. The manufacturing PMI is a leading indicator.
Caixin, a private organization, releases a manufacturing PMI that tracks the economy of Chinese exporters and SMEs, unlike the official manufacturing PMI released by the National Bureau of Statistics, which is geared toward large state-owned enterprises.
Caixin said, “Supply and demand in the manufacturing industry dropped in August as a result of the epidemic and floods. “I said the situation has worsened,” he also reported.
For the first time since February, the index of new export orders fell below 50, with transportation stalling due to Covid-19 pandemic and foreign demand dropping. The employment index also declined for the first time in five months.
As a result of the decline in production demand, companies responded to Caixin that they had made adjustments in employment size and the positions left unfilled as a result.
In contrast, these two indicators both rose slightly, reiterating concerns about inflationary pressures. Manufacturers reported that raw material prices, transportation costs and the factory-gate price index all increased for the first time since May.