China factory PMI suggests momentum slowed in July

BEIJING • China’s official factory gauge dialled back a notch in July as a push by authorities to curb financial risks spreads.

The manufacturing Purchasing Managers’ Index (PMI) slowed to 51.4 in July, missing 51.5 forecast in Bloomberg survey and down from 51.7 in June. The non-manufacturing PMI was 54.5 versus 54.9 a month earlier. Numbers higher than 50 indicate improving conditions.

The world’s second-largest economy performed more strongly than analysts had anticipated in the first-half (1H), buoyed by a turnaround for exports and resilient domestic demand. A statistics official attributed the slowdown in manufacturing activities in July to high temperatures in some regions and floods in others, while some factories had regular equipment maintenance. Challenges lie ahead for the 2H as policymakers slow the pace of credit expansion and vow to tackle excessive leverage.

“July’s PMI signals a slight softening of the manufacturing sector,” said Raymond Yeung, the Hong Kong-based chief economist at Australia & New Zealand Banking Group Ltd. “External demand will likely drop in the summer and third-quarter gross domestic product growth isn’t expected to hit 6.9%. But we aren’t worried about the decline today.”

Reading of input prices accelerates to 57.9, output prices climbs to 52.7. New export orders index slips to 50.9. — Bloomberg