China's July Caixin PMI surprises positively, at 4-month highs

China Caixin Manufacturing PMI for July came at 51.1 vs. 50.4 exp and 50.4 last, with Caixin's summary noting that both output and new orders rose at the fastest rates since February.

Summary:

Operating conditions faced by Chinese manufacturers improved at a slightly quicker pace in July. Companies indicated that both output and new orders rose at the fastest rates for five months, helped by a solid upturn in new export sales. At the same time, inflationary pressures ticked up, with both input prices and output charges rising at faster rates than in June. However, companies maintained a relatively cautious stance towards employment, with staff numbers falling again in July. This coincided with a subdued level of confidence towards the business outlook, with optimism towards the year ahead dipping to an 11-month low.

The seasonally adjusted Purchasing Managers’ Index™ (PMI™) – a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy – posted above the neutral 50.0 value at 51.1 in July, up from 50.4 in June. This signalled an improvement in the health of China’s manufacturing sector for the second successive month, following a slight deterioration in May. Though marginal, the pace of improvement was the strongest seen for four months.

Commenting on the China General Manufacturing PMI™ data, Dr. Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group said: “The Caixin China General Manufacturing PMI rose 0.7 points to 51.1 in July, the highest reading in four months. The sub-indices of output and new orders both rebounded further from May’s recent lows. The sub-indices of input costs and output prices both continued to rise to hit four-month highs. Although the sub-index measuring stocks of finished goods remained in contraction territory and slid further, the sub-index showing quantity of purchases indicated the strongest rise in buying activity for five months, pointing to moderate growth in manufacturing production going forward. Operating conditions in the manufacturing sector improved further in July, suggesting the economy’s growth momentum will be sustained. That said, it’s unlikely that financial regulatory tightening will be relaxed.”