Growth in Chinese manufacturing sector picks up pace in July
GROWTH in China’s manufacturing sector quickened last month, a private survey showed yesterday, as output and new orders rose at the fastest pace since February on strong export sales.
But even as firms boosted purchasing in anticipation of more business, employment levels at factories fell at the fastest pace in 10 months and a reading on business outlook was the lowest since last August – a sign that economic momentum may start to ebb in the months ahead.
The Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) rose to 51.1 points in July, above the 50 point mark that separates growth from contraction, and well ahead of the 50.4 points in June, which was the median figure forecast by 21 analysts.
A resurgent export sector, underpinned by a brightening global economy, helped China to post surprisingly strong gross domestic product growth of 6.9 percent in the first half of the year.
The Caixin readings diverged from an official PMI survey released on Monday that showed that growth in China’s manufacturing sector cooled slightly last month, with export demand slackening.
Divergence in the two indexes is usually a result of the Caixin PMI’s smaller sample size rather than anything fundamental to China’s economy, said Jonas Short, who heads the Beijing office at investment bank Sun Hung Kai Financial.
The Caixin new export orders reading came in at 53.5 points in July, up from
The Purchasing Managers’ Index rose to 51.1 points in July, well ahead of the 50.4 points in June
50.9 points in June and the highest since February.
Despite mixed signals, analysts are still generally optimistic about the outlook for China’s exports, even if there was a slight dip in July.
Although China’s foreign trade faces a mostly positive environment in the second half of the year, uncertainties exist, vice commerce minister Qian Keming said on Monday.
The US and China failed earlier this month to agree on major new steps to reduce the US trade deficit with China, casting doubt over President Donald Trump’s economic and security relations with Beijing.
The broader consensus among China watchers is that economic growth will cool in coming months as a government crackdown on financial risks raises borrowing costs, squeezing profits and output. But there appears to be more than enough momentum to reach Beijing’s growth target of about 6.5 percent for the year.
Chinese goods producers last month were able to raise output prices the most since March, yesterday’s PMI showed, as input inflation also accelerated, although the price gains were much milder than those seen at the turn of the year. Companies still expected to increase output over the next 12 months, but the reading was the lowest since August. – Reuters