Chinese manufacturing unexpectedly fell sharp to the lowest in 15 months according to a private gauge, reinforcing the need for further policy support in the world’s second-largest economy.
China’s preliminary (or “flash”) General Manufacturing Purchasing Managers’ Index (PMI) from Caixin and Markit Economics, previously known as the HSBC PMI, fell to 48.2 in July, down from 49.4 in June and worse than all 16 forecasts in a Bloomberg survey, where the median estimate was for an increase to 49.7. A reading below 50 indicates a contraction.
The preliminary PMI reading weakens the outlook for China’s economy adding to increased pressure on authorities to do more to meet Premier Li Keqiang’s 2015 growth target of “about 7 percent“.
The decline in China’s preliminary July manufacturing gauge contrasts from a better-than-expected economic growth growth rate last quarter, where the country’s gross domestic product (GDP) rose 7 percent in the three months through June from a year earlier, which was steady with growth from the previous quarter and beat economists’ estimates for 6.8 percent growth.
A slump in property investment and a recent stock market crash are underscoring the risks that remain even after policy makers have ramped up support in recent months.
The Caixin China Report on General Manufacturing is based on data compiled from executives at over 420 manufacturing companies. The panel is stratified geographically and by Standard Industrial Classification (SIC) group, based on industry contribution to Chinese GDP.
The flash estimate is based on around 85% of total PMI survey responses each month and is designed to provide an accurate advance indication of the final PMI data.
China’s final July PMI data will be released on August 3.
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