Beijing: China’s official factory purchasing managers’ index (PMI) fell to an eight-month low of 50.1 in July from 50.2 in June, suggesting the sector is barely growing, a survey by the National Bureau of Statistics showed on Wednesday.
The figures showed that factory output was expanding, but that new orders, including new export orders, were contracting in July more deeply than in June.
Economists polled by Reuters this week had expected July’s official PMI to edge up to 50.3, above the 50 point level that demarcates expansion from contraction, after Beijing had come up with various measures aimed at shoring up growth in the world’s second-largest economy.
The China Federation of Logistics and Purchasing (CFLP), which compiles the data, said in a statement that the data suggested the economy is hitting a bottom and it will continue to stabilize in coming months.
“But current demand is still relatively weak, and the downward pressure from oversupply has not been eliminated,” it said.
The July PMI was the lowest reading since November, in the latest sign that growth in the world’s second-biggest economy is slowing on the back of a cooling pace in exports, factory output and fixed asset investment.
“The low point will likely be pushed to the third quarter, although that depends on the policy response,” Zhou Xizhen of Citic Securities in Beijing said of China’s economic slowdown.
A flash PMI published last week by HSBC rose to a five-month high of 49.5 in July, indicating the sector was still contracting but at a weaker pace. The index was boosted by a pick up in factory output and signs of improvement in new export orders, but the employment index fell to a 40-month low.
A Reuters poll in July showed most analysts thought China’s economic slowdown bottomed out in the second quarter. They forecast a modest pick up in economic activity in the third quarter to snap six straight quarters of slower growth.
Economists forecast the pick up would bring China’s full-year growth to 8%.
To prevent a credit squeeze on property developers and weak overseas demand from denting growth too much, Beijing has lowered interest rates twice and reduced banks’ reserve requirement ratio three times since November. Investors expect to see more, though few anticipate a full-blown fiscal stimulus package in the manner of 2008.
A Reuters poll in July showed analysts expect China to lower banks’ reserve requirements by another 100 basis points this year to 19% for its biggest banks.