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China July data points to softer growth momentum, economists say

Standard Chartered expects China’s CPI to have eased to 0.5% year on year in July, with services and construction PMIs at multi year lows.

Reported · Written up by our desk · Central Banks

Standard Chartered economists Hunter Chan and Shuang Ding said China’s July data likely showed weaker growth momentum, citing official PMIs that were all below 50 and at multi year lows for manufacturing, services, and construction. In their view, manufacturing PMI fell to 49.2 in July, with the new orders PMI dropping deeper below 49. They also pointed to services and construction PMIs falling to multi year lows, suggesting softer domestic demand even as they expect trade and industrial production to remain more resilient than the headline indicators. They said easing consumer price trends likely reflected lower food and fuel costs, with CPI inflation expected to ease to 0.5% year on year in July, the first below 1% reading in six months. At the same time, they expected producer price inflation to ease on falling petrol related product prices, while headline inflation could still hold around 4.1% year on year.

They added that base effects may have supported retail sales, while fixed asset investment likely stayed in contraction, with adverse weather disrupting construction activity and real estate investment remaining a key drag. Standard Chartered also noted that the semiconductor sector likely continued to outperform, supporting China’s trade and production activity, even as oil price moderation in June weighed on export and import prices in July.

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