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China Manufacturing Sector Expands In July

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China's manufacturing sector expanded in July following the easing of COVID-19 containment measures but the pace of growth softened, survey results from S&P Global showed on Monday.

The Caixin factory Purchasing Managers' Index slipped to 50.4 in July from 51.7 in June. Nonetheless, a score above 50.0 indicates expansion in the sector.

However, the PMI survey data from the National Bureau of Statistics, released over the weekend, showed that the manufacturing sector dropped back into contraction territory in July. The official manufacturing PMI slid to 49.0 from 50.2 in June.

At the same time, the non-manufacturing PMI declined to 53.8 from 54.7 a month ago. Nonetheless, the sector remained in the expansion zone.

The ongoing recovery from the latest wave of the pandemic underpinned demand but overall conditions remained relatively subdued, S&P said. Moreover, new export business increased only marginally.

In line with new orders, manufacturers in China signaled a softer rise in production in July. The slowdown was caused by muted customer demand, lingering COVID-19 impacts and power supply disruption at some firms.

Employment decreased for the fourth consecutive month in July as firms tired to contain cost amid muted sales. Furthermore, the rate of job shedding was the quickest seen since April 2020.

Suppliers' delivery times lengthened slightly in July due to stock and staff shortages, and disruption from COVID-19.

The survey showed that input costs increased at the slowest pace in seven months. Softer demand conditions meanwhile led to a moderate reduction in prices charged.

Manufacturers generally anticipate an expansion of output over the next year amid forecasts of a strong post-pandemic recovery and planned company expansions.

"Major macroeconomic indicators in the second quarter showed that the adverse impact of the latest round of Covid outbreaks on the economy is fading," Wang Zhe, a senior economist at Caixin Insight Group said. The third quarter will therefore be a crucial period to get the economy back on track.

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