China's manufacturing activity weakens

1 Aug 2012, 3:02 pm   -   Source: AAP

China's manufacturing activity was at an eight-month low in July, official data shows.

China's manufacturing activity has weakened to an eight-month low in July, official figures show, as the economy suffers from weak growth abroad and turmoil in Europe.

The official purchasing managers' index (PMI) slipped to 50.1 last month from 50.2 in June, according to a statement released by the National Bureau of Statistics.

A PMI reading above 50 indicates expansion, while a figure below 50 means contraction.

The July statistic was the lowest since a reading of 49.0 last November, and below the expectations of economists surveyed by Dow Jones Newswires, who forecast it at 50.4.

However, Alistair Thornton of IHS Global Insight said that while the figure was disappointing, it suggested manufacturing activity may be bottoming out.

"This is not the bump that authorities are looking for," he said.

"But the good news is that things are not getting significantly worse."

China is facing a loss of momentum in its economy, with year-on-year growth slowing to 7.6 per cent in the second quarter.

That was the worst performance since the world economic crisis of 2008-2009 and marked the sixth straight quarter of slackening growth as global problems, including the eurozone debt crisis, hit home.

"Industrial profitability is bad, balance sheets are stressed, the banking sector is feeling the impact of a debt build-up, and capital continues to flee the country," Thornton said.

"These restrain a smooth recovery."

A preliminary July PMI from British bank HSBC last week showed manufacturing activity in the world's second-biggest economy contracting at its slowest pace since February, with the closely-watched figure at a five-month high of 49.5.

Analysts say the divergence in the PMI surveys is caused by HSBC giving more weight to small firms, which have suffered more than state-owned giants in the current economic downturn.

HSBC was scheduled to release its final figures later on Wednesday.

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