China July factory sector perks up

Written by Reuters | Beijing | Updated: Aug 3 2013, 01:37am hrs
China offered a rare bright spot in an otherwise sluggish Asian manufacturing sector in July with a stronger than expected government purchasing managers index that eased some concerns over the health of the worlds second-biggest economy.

Although the China PMI surprised and gave a boost to regional share prices and commodities, it also signalled 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 stabilising at least, but it is still a bit early to conclude that things have turned around decisively, Wei Yao, China economist at Societe Generale 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, 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.

Chinas 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 has become more concerned at the slowdown in the economy this year. The China PMI boosted Asian shares and commodity prices as the report provided some short-term relief from a run of gloomy data in China all year. Economic growth has slipped in nine of the past 10 quarters.

The HSBC PMI, however, said Chinas factory activity shrank in July for the third straight month as new orders and new exports orders fell.