China’s July PMI inches up as recovery solidifies

China’s July PMI inches up as recovery solidifies
© Reuters Limited
August 1, 2009
http://www.ft.com/cms/s/0/65eaab26-7e84-11de-999d-00144feabdc0.html


BEIJING, Aug 1 - China’s manufacturing sector consolidated its recovery in July, with businesses benefiting from a revived domestic economy and reporting a slight pick-up in external demand, a key survey released on Saturday showed.

China’s official purchasing managers’ index (PMI) for July inched up to 53.3 from 53.2 in June, the China Federation of Logistics and Purchasing (CFLP) said.

It was the fifth straight month that the official PMI has stood above the watershed mark of 50, indicating an expansion of activity. It was also the third consecutive month that the PMI reading had increased ever so slightly, showing that the recovery had steadily found firmer footing.

”Looking ahead, with domestic demand growing more quickly, we can forecast that the economic recovery will continue,” said Zhang Liqun, a researcher at the State Council’s Development Research Centre who comments on the official figure for the logistics federation.

The new orders sub-index was unchanged in solidly expansionary territory at 55.5 in July from June. Of the 20 industries covered in the survey, 14 reported growth in new orders.

Half of these industries also said export orders were up on the previous month, making for an overall export sub-index of 52.1, its third straight expansionary month.

In all, 9 of 11 sub-indexes were higher than their respective levels in June.

”These figures reflected that mainland manufacturers continued to benefit from strong domestic demand and an improving export situation,” Li & Fung, a Hong Kong trading group that distributes the data, said in an accompanying research note.

Beijing responded to last autumn’s slump in global demand with a massive 4,000bn renminbi stimulus package and by prodding banks to unleash a flood of loans.

Alongside improvements in other timely data such as power consumption, tax revenues, industrial profits and car sales, Saturday’s reports indicate that the pump-priming is working.

Investors have also watched the PMI figures with extra vigilance because they have come to be seen as essential leading indicators in a fast-changing economic landscape.

The official PMI is now nearly 15 index points higher than the record low of 38.8 it plumbed in November. It remained, however, below its 2009 high of 53.5 hit in April, though economists said at the time that the April figure was somewhat inflated because of seasonal factors.