Growth in China’s manufacturing quickened in July, with output and new orders rising at the fastest pace since February on strong export sales.
But even as firms boosted purchasing in anticipation of more business, employment levels at factories fell at the fastest pace in 10 months and a reading on business outlook was the lowest since last August – a sign economic momentum may start to ebb in the months ahead.
The Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) rose to 51.1 in July, above the 50-point mark separating growth from contraction and well ahead of the 50.4 in June.
A resurgent export sector underpinned by a brightening global economy helped China post surprisingly strong gross domestic product growth of 6.9 per cent in the first half of the year.
The Caixin readings diverged from an official PMI survey released on Monday which showed growth in China’s manufacturing sector cooled slightly last month, with export demand slackening.
Divergence in the two indexes is usually a result of the Caixin PMI’s smaller sample size rather than anything fundamental to China’s economy, said Jonas Short, who heads the Beijing office at investment bank Sun Hung Kai Financial (SHKF).
The Caixin new export orders reading came in at 53.5 in July, up from 50.9 June and the highest since February.
Despite mixed signals, analysts are still generally optimistic about the outlook for China’s exports, even if there is a slight dip in July.
“We are not that worried about the export outlook for China in the second half,” said ANZ senior China economist Betty Wang.
While China’s foreign trade faces a mostly positive environment in the second half of the year, uncertainties still exist, Vice Commerce Minister Qian Keming said in Beijing on Monday.