Fac­tory PMI stays soft, but ser­vices firm on new or­ders

China Daily (Canada) - - FRONT PAGE - By BLOOMBERG

A Chi­nese fac­tory gauge re­mained slug­gish last month, sug­gest­ing a tepid re­sponse from man­u­fac­tur­ers to loos­ened mon­e­tary pol­icy set­tings and ef­forts to shore up lo­cal gov­ern­ment fi­nances.

The of­fi­cial Pur­chas­ing­Man­agers In­dex was 50.2 for June, miss­ing the me­dian es­ti­mate of 50.4 in a Bloomberg sur­vey and un­changed from May. The ser­vices PMI, a mea­sure of ser­vices and con­struc­tion, fared bet­ter, climb­ing to 53.8 in June from 53.2 in­May.

Num­bers ex­pan­sion.

The Peo­ple’s Bank of China, the cen­tral bank, low­ered bench­mark in­ter­est rates over the week­end in the fourth such move since Novem­ber af­ter a share mar­ket plunge added to chal­lenges con­fronting the econ­omy. While read­ings for in­dus­trial out­put, re­tail sales and prop­erty prices stead­ied in May, gov­ern­ment pol­icy re­sponses have yet to spur a re­bound.

“This is a sign of sta­bi­liza­tion, but we haven’t seen any rapid re­bound yet,” said Ding Shuang, chief China

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in­di­cate economist at Stan­dard Char­tered Plc in­HongKong. “A re­bound needs more pol­icy sup­port,” in­clud­ing fur­ther re­duc­tions to the amount of cash banks must set aside, Ding said.

The ser­vices gauge was led by a climb in neworders.

But in terms of the fac­tory read­ing, mea­sures of new or­ders, new ex­port or­ders, in­put prices and em­ploy­ment de­te­ri­o­rated in June from the prior month.

“The sit­u­a­tion is not good. Im­por­tant sub-in­dexes such as or­ders, prices, pro­duc­tion ... all seem slug­gish,” said Zhou Hao, a Shang­hai-based economist at Aus­tralia & New Zealand Bank­ing Group Ltd. “The econ­omy has sta­bi­lized, but there are still down­side risks. Fis­cal, in­dus­trial and mon­e­tary po­lices need to be more co­or­di­nated. Fis­cal poli­cies need to be more proac­tive so that mon­e­tary eas­ing can be more ef­fec­tive.”

The fi­nal read­ing of a sep­a­rate PMIre­port fromHSBCHold­ings Plc and Markit Eco­nom­ics came in at 49.4 for June, down from an ini­tial read­ing of 49.6.

ThePBOC’s eas­ing cy­cle started in Novem­ber, when it cut the lend­ing rate from 6 per­cent to 5.6 per­cent. Three fur­ther quar­ter per­cent­age point re­duc­tions have brought it to 4.85 per­cent, still high by global stan­dards. Bloomberg’s monthly GDP growth tracker has been be­low the gov­ern­ment’s 2015 growth goal of about 7 per­cent all year.

“While con­di­tions have stopped get­ting­much­worse, they have yet to get ap­pre­cia­bly bet­ter,” Bei­jing­based Bloomberg economist Tom Or­lik wrote in a note. “Sta­bi­liza­tion in growth at a low rate means the re­cov­ery will look more like an ‘L’ than a ‘V.’”

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