China factory sector expands first time since February
Staff Writer |
China's manufacturing sector expanded for the first time since February 2015 as output, new orders and buying activity returned to growth, the results of a survey revealed.
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This was in contrast to the official Purchasing Managers' data that showed contraction in the factory sector due to floods and weak demand.
The Caixin factory Purchasing Managers' Index rose more than expected to 50.6 in July from 48.6 in June, Markit reported. The score exceeded the neutral 50 mark for the first time since February 2015 and was above the expected score of 48.9.
The official PMI dropped to 49.9 in July from 50 a month ago,according to the report released by the National Bureau of Statistics and the China Federation of Logistics and Purchasing. The score was expected to remain unchanged at 50.0. The official non-manufacturing PMI climbed to 53.9 in July from 53.7 in June.
Markit report showed that overall new orders logged a moderate increase, but it was the first rise since March. New products and improved marketing strategies boosted new business.
Higher production contributed to a renewed expansion in purchasing activity. Input buying also increased for the first time since March.
Despite the upturn in new orders, goods producers continued to lower their staffing levels in July. Job shedding was largely driven by efforts to reduce costs and raise productivity.
Stronger demand for inputs added pressure to supply chains in July, with average delivery times lengthening for the fifth successive month.
Average input costs increased across China's manufacturing sector in July. Input inflation was the second-fastest since September 2013. Higher prices for raw materials led to increased cost burdens. Consequently, companies raised their prices charged at a solid pace.
With the delayed impact of stronger credit growth still feeding through to the real economy, Julian Evans-Pritchard at Capital Economics expects a further improvement in the data out of China in the short-run. ■