China's factory activity shrank for a fifth consecutive month, and the services sector experienced a sharp slowdown in September 2024, indicating an urgent need for additional government stimulus to meet the 2024 growth target. The National Bureau of Statistics (NBS) reported a purchasing managers' index (PMI) of 49.8 in September, a slight increase from 49.1 in August, but still below the critical 50-mark that separates growth from contraction.
Despite the uptick, the data reflects ongoing challenges in both manufacturing and consumer sectors, with analysts warning that the recent policy measures may not be sufficient to drive a recovery. The Chinese government has introduced its most aggressive stimulus package since the COVID-19 pandemic, which contributed to a significant rally in stock markets.
Economic experts note that while there are some positive indicators in manufacturing, the broader economic landscape remains precarious. Weak consumer demand and a challenging global trade environment continue to pose risks. The official services PMI fell to 49.9, marking the first contraction since December last year, exacerbated by seasonal factors and extreme weather conditions.
In response to the downturn, the Chinese authorities are implementing measures such as lowering mortgage rates and increasing bond issuance to stimulate growth. However, concerns persist regarding the effectiveness of these strategies in addressing the underlying issues within the economy, particularly in the housing market.
As China prepares for the upcoming Golden Week holidays, attention is focused on consumer behavior and property sales, which are critical for the economic outlook.