Mainland factory sector growth hits 3-month low
Bigger-than-expected drop in HSBC China PMI points to need for more relaxed state policies
The mainland's factory sector expanded at its slowest pace in three months as new orders and production moderated, a private survey showed, increasing the pressure for more policy easing given the slowdown in the economy.
The HSBC flash China manufacturing purchasing managers' index fell to 50.3 from 51.7 last month, trailing economists' average forecast of 51.5.
The data "suggests the economic recovery is still continuing but its momentum has slowed again", said Qu Hongbin, the chief economist for China at HSBC.
"We think more policy support is needed to help consolidate the recovery. Both monetary and fiscal policy should remain accommodative until there is a more sustained rebound in economic activity."
Almost all the PMI sub-indices declined, with output dropping to a three-month low of 51.3 from 52.8 and new orders sliding to 51.3 from 53.3. Export orders also declined, albeit less drastically.
We think more policy support is needed to help consolidate the recovery
"Given the HSBC PMI tends to lag [month on month industrial production] slightly, it may be a reflection of weaker growth momentum in July amid tighter monetary conditions and less aggressive policy measures," Goldman Sachs economist Song Yu said.
