BEIJING, Aug 28 (Reuters) - China's factory activity is expected to have contracted for a second straight month in August, a Reuters poll showed on Friday, indicating that manufacturers' sentiment likely remained downbeat amid soft demand and extreme weather.
The official manufacturing purchasing managers' index (PMI) will likely rise to 49.6 from 49.2 the previous month but remain below the 50-mark separating growth from contraction, according to a Reuters poll of 17 economists.
The official data,
which are based on company surveys, will be released by the National Bureau of Statistics on Monday.
Another contraction in factory activity would indicate mounting headwinds facing the world's second-largest economy, whose expansion had slowed to 4.3% in the second quarter, below the lower end of Beijing's 4.5-5% annual target, as soft domestic demand and the ongoing property market slump continued to sap growth.
China has been able to shore up growth and fend off the impacts from the Middle East war with manufacturing and exports as a global AI infrastructure investment boom lifts demand for high-tech goods.
Economic indicators released this month, however, suggested that growth had further lost steam in the beginning of the second half and that imbalances in the economy were deepening.
Industrial output and retail sales both slowed in July, likely hampered by unusually active extreme weather, while growth in industrial profits also cooled as industries relying on domestic demand remained under pressure despite those in advanced sectors benefiting from higher profit margins.
New yuan loans posted a record contraction as seasonal factors and weak household credit demand weighed on lending.
Factory activity in August was likely also affected by extreme weather as multiple typhoons, including Dolphin and Narra, brought heavy rain and triggered floods across the country.
Policymakers pledged in late July to roll out new measures in a timely manner, but analysts said an introduction of large-scale stimuli was unlikely.
The government has expanded loan interest subsidies for small private firms and consumers and opened applications for an 800 billion yuan ($119.04 billion) policy-based financing tool for local government projects amid declining fixed-asset investment.
The private sector RatingDog manufacturing PMI, due to be released on September 1, is expected to edge up to 51.0 from 50.9 in July.
($1 = 6.7206 Chinese yuan renminbi)
(Reporting by Yukun Zhang and Liz Lee; Polling by Susobhan Sarkar in Bengaluru and Jing Wang in Shanghai; Editing by Kim Coghill)
