China bucks weak Asia manufacturing statistics

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China bucks weak Asia manufacturing statistics

China offered a rare bright spot in an otherwise sluggish Asian manufacturing sector in July with a stronger-than-expected government Purchasing Managers’ Index (PMI) that eased some concerns over the health of the world’s second-biggest economy.

Although the China PMI surprised and gave a boost to regional share prices and commodities, it also signaled only a modest pace of growth.

A rival report from HSBC was much more gloomy, showing factory activity fell to its lowest in nearly a year.

“I think the official report does offer a slim hope that the economy is stabilizing at least, but it is still a bit early to conclude that things have turned around decisively,” said Wei Yao, China economist at Societe Generale bank in Hong Kong.

Elsewhere in Asia, other PMI reports suggested factory output and new orders falling in July in India, South Korea and Taiwan. In Indonesia, a PMI report signalled that output and new orders were holding at similar levels to June.

New export orders also fell broadly in Asia. However, overseas demand was still growing in India, although at a weaker pace than in June.

The Asian PMIs, which seek to measure a range of conditions in manufacturing including employment, stock levels and backlogs of work, were released ahead of similar reports on the euro zone and the United States, which are expected to show factory activity picking up at a more robust pace than in Asia.

A PMI reading above 50 indicates expansion from the month before, while a reading below suggests contraction in activity.

In the United States, the Institute for Supply Management is expected to report that its PMI rose to 52.0 in July from 50.9 in June, extending a rebound from a contraction in factory activity in May.

China’s official PMI rose to 50.3 in July, contrary to expectations that it would fall to 49.9 from 50.1 in June, suggesting a pick up in activity as growth in new orders quickened.

Beijing, which is targeting GDP expansion this year of 7.5 percent, a 23-year low, has become more concerned at the slowdown in the economy this year and has offered reassurances in a flurry of announcements in the past two weeks that the government will safeguard growth.

Reuters

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