You are here

China factory gauge falls on tighter credit, trade war risks

nz-factory-310718.jpg
China's official factory gauge weakened this month, as credit conditions tighten and the trade war threatens exports.

[BEIJING] China's official factory gauge weakened this month, as credit conditions tighten and the trade war threatens exports.

The manufacturing purchasing managers index fell to 51.2 in July from 51.5 in June and lower than the forecast of 51.3 in a Bloomberg survey of economists. The non-manufacturing PMI, covering services and construction, stood at 54, the statistics bureau said Tuesday, compared with 55 in June. Levels above 50 indicate improvement.

Factories are faced with challenges both at home and abroad, with slower credit growth this year denting demand and the imposition of the first round of tariffs a sign of what may be coming for more of China's exports. The government last week unveiled a package of fiscal support including tax cuts and acceleration of bond issuance for infrastructure investment, and there are also signs that the ongoing campaign to curb leverage is being softened.

The reading for new orders slipped to 52.3 from 53.2 the previous month, with new export orders remaining in contraction territory at 49.8. Price sub-gauges also dropped, with input prices falling to 54.3 from 57.7 and output prices declining to 50.5 from 53.3.

sentifi.com

Market voices on:

"The data clearly show a slowdown in economic momentum," said Raymond Yeung, chief greater China economist for Australia & New Zealand Banking Group Ltd in Hong Kong. "It may justify the more proactive fiscal stance launched last week. The decline in new orders with new export orders staying flat means the slowdown is domestic, not an impact of the trade war."

BLOOMBERG