China's July PMI hits 27-month high on strong factory orders

PMI data suggests economy is regaining momentum after stimulus measures

PUBLISHED : Friday, 01 August, 2014, 9:36am
UPDATED : Saturday, 02 August, 2014, 12:33am

Activity in the mainland's factory sector expanded last month at the fastest pace in 27 months on stronger demand, a government survey showed, adding to evidence that the economy is regaining momentum after a burst of government stimulus measures.

The official manufacturing purchasing managers' index rose to 51.7 - the strongest since April 2012 and up from 51 in June - the National Bureau of Statistics said yesterday. Economists had expected a reading of 51.4.

A number above 50 indicates an expansion in activity while one below that level points to a contraction.

The official survey showed a broad-based recovery in manufacturing activity, with 10 out of the 12 sub-indices pointing to improvement from June.

A sub-index for new orders, a measure of both foreign and domestic demand, rose to 53.6 from 52.8, the highest level since May 2012.

Export orders edged up to 50.8 from 50.3, indicating a modest pickup in global demand.

As one of the leading indicators that help gauge economic momentum, the official PMI data is closely watched by the market, and an improvement in the reading could bode well for other July indicators.

Zhang Liqun, an economist at the Development Research Centre, said in a statement: "This indicates that a shift from a slowdown to stabilisation in economic growth has been fully formed and the trend will continue for a period of time."

Meanwhile, a private survey showed yesterday the factory sector last month posted its strongest growth in 18 months as new orders surged to multi-month highs.

The HSBC/Markit China manufacturing PMI climbed to 51.7 from June's 50.7 but fell short of a preliminary reading of 52. Last month's reading is the strongest since January last year.

Output and total new orders both rose at the strongest rates since March last year, while new exports increased at the second-fastest pace in more than 31/2 years.

The government has unveiled a series of modest stimulus measures since April, including targeted reserve requirement cuts for some banks and hastening construction of railways and public housing projects, to give a lift to economic growth, which dipped to an 18-month low in the first quarter.

In response, economic growth quickened to 7.5 per cent in the second quarter from an 18-month low of 7.4 per cent in the first.

Some economists say the economic recovery still hinges on the magnitude of Beijing's pro-growth steps and whether the government can successfully curb the risks stemming from a cooling property sector. Beijing said on Tuesday it would focus more on targeted measures to help shore up the economy.