China factory activity shows signs of pick-up

The HSBC/Markit Flash China Manufacturing Purchasing Managers' Index (PMI) edged up from 49.2 to 49.6 this month - a three-month high - but remained below the 50 mark that separates contraction from expansion.
The HSBC/Markit Flash China Manufacturing Purchasing Managers' Index (PMI) edged up from 49.2 to 49.6 this month - a three-month high - but remained below the 50 mark that separates contraction from expansion.PHOTO: REUTERS

BEIJING - China's factory activity showed signs of stabilising this month, suggesting the economy may be regaining some momentum, while euro zone private businesses expanded at their fastest pace in four years this month.

Growth in the United States manufacturing sector, on the other hand, moderated this month for a third month in a row, slipping to its slowest pace since late 2013, according to industry reports released yesterday.

The HSBC/Markit Flash China Manufacturing Purchasing Managers' Index (PMI) edged up from 49.2 to 49.6 this month - a three-month high - but remained below the 50 mark that separates contraction from expansion.

Yesterday's release - the first reading of the world's second-biggest economy's health this month - follows official data showing stabilisation in industrial production, credit growth and property sales in May.

Further evidence of a pick-up could reduce pressure on the People's Bank of China to ease monetary policy further.

"With many more measures recently announced to stimulate growth, we believe the economy will pick up in the coming months," Dr Shen Jianguang, chief Asia economist at Mizuho Securities Asia in Hong Kong, wrote in a report before the data.

"Fiscal easing, particularly related to relaxing local government access to financing, should boost fiscal investment."

In the euro zone, factory and services indices also unexpectedly rose to the highest in more than four years this month as growth gained momentum in Germany and France, the bloc's two largest economies.

Markit Economics yesterday said its composite index increased to 54.1 from 53.6 last month. That is above the 50 mark and exceeds the median estimate of economists who forecast that it would slip to 53.5.

France's gauge of the two industries climbed to the highest since 2011 and growth in Germany also strengthened.

The euro zone is weathering the Greek debt stand-off "relatively well", said Markit chief economist Chris Williamson.

European Central Bank stimulus and a weaker euro helped boost euro zone growth to 0.4 per cent in the first quarter, and Markit said its PMI suggests the region grew at a similar pace between April and this month.

The preliminary US Manufacturing Purchasing Managers' Index declined to 53.4 this month, from a final May reading of 54. Economists had forecast that this month's figure would be 54.2.

"The slowdown is being led by deteriorating export performance, which many producers, in turn, linked to a loss of competitiveness caused by the stronger dollar," Mr Williamson said.

The index's flash output component fell to 53.9 from the final May reading of 55.2. The June flash output level was the lowest since January last year, according to Markit data.

REUTERS, BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on June 24, 2015, with the headline 'China factory activity shows signs of pick-up'. Print Edition | Subscribe