An indicator of Chinese manufacturing activity rose to its highest level in five months in July despite suggesting contraction, with the modest improvement hinged on a rebound in output, which rose to a nine-month high.
Flash estimates released by Markit Economics revealed that the purchasing managers' index came in at 49.5 in July, up from 48.2 in June, suggesting the slowest contraction in manufacturing activity in five months.
A PMI reading above 50 suggests expansion of the sector, while a score below 50 indicates contraction. The latest reading indicated that the factory sector is into its ninth month of contraction.
Meanwhile, Markit said the flash manufacturing output index rebounded to a nine-month high of 51.2 in July from 49.3 in June. Both new orders and new export orders contracted, but at a slower pace than in the previous month.
The pick-up in the index suggests that the earlier easing measures are starting to work, HSBC Chief Economist Hongbin Qu said.
"That said, the below-50 July reading implied demand still remaining weak and employment under increasing pressure. This calls for more easing efforts to support growth and jobs," he added. Markit survey showed that employment fell at a faster pace this month.
The economy grew 7.6 percent in the second quarter, the weakest pace since the first quarter of 2009. The People's Bank of China cut interest rates in June and July amid a significant slowdown in economic activity. The bank has lowered the reserve requirement ratio three times since November 2011.
Premier Wen Jiabao warned earlier this month that the country's economic recovery is not yet stable and economic hardships may continue for a period of time.
The Conference Board said Tuesday that the growth rate of its leading economic index for China slowed significantly in June.
Andrew Polk, Conference Board's resident economist at Beijing, said coupled with slowing and volatile growth in the coincident index that measures the current economic activity, the composite indexes suggest that the real economy is not showing any material rebound, and that this situation is likely to persist for several months to come.
by RTT Staff Writer
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