China manufacturing hits 15-month low

GMT 07:53 2015 Friday ,24 July

Arab Today, arab today China manufacturing hits 15-month low

Chinese manufacturing activity
Beijing - AFP

A key gauge of Chinese manufacturing activity tumbled to a 15-month low in July, an independent survey showed, throwing a pall over growth in the world's second-largest economy.

The preliminary reading of Caixin's Purchasing Manager's Index (PMI) came in at 48.2 this month, the Chinese media group said in a joint statement with Markit, a financial information services provider that compiled the survey.

The figure was the weakest reading since 48.1 in April 2014, according to Markit's data.

The index, which tracks activity in factories and workshops, is seen as a key barometer of the country's economic health. A figure above 50 signals growth, while anything below indicates contraction.

Caixin took over sponsorship of the PMI survey from British banking giant HSBC this month.

July's flash PMI was worse than the market expected, Chen Xingdong, a Beijing-based economist with BNP Paribas told AFP.

"China's industrial economy has had a hard landing or is in industrial recession in my opinion," he said.

Industrial output in the country grew just 6.8 percent year-on-year in June, while the producer price index -- a measure of costs for goods at the factory gate -- declined 4.8 percent, official figures showed.

"The core reason is effective demand remains weak," said Chen, adding China had become a less competitive exporter than many other developing countries while domestic consumption had barely improved.

Third-quarter growth was "under enormous pressure", he said. "Although I don't think it will decelerate further, the recovery momentum is extremely feeble."

China's economy expanded 7.4 percent last year, the weakest pace since 1990, and slowed further to 7.0 percent in each of the first two quarters this year.

Julian Evans-Pritchard, an analyst with research firm Capital Economics, said the PMI figures suggested recent improvements in economic momentum "may have been derailed" this month by weaker foreign demand.

"We think that recent policy easing has yet to fully feed through into stronger economic activity and expect policymakers to respond to signs of weakness by stepping up support in order to prevent growth from slipping much further this year," he wrote in a note.

Nomura economists linked the lower PMI reading to dampened short-term sentiment following China's recent stock market rout, which saw the benchmark Shanghai Composite Index slump more than 30 percent in less than four weeks before stabilising earlier this month.

"As the equity markets have stabilised, we expect growth momentum to strengthen in coming months," they said in a report.

July's final PMI data is due on August 3, Caixin and Markit said.

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