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PMI posts highest reading in more than two years

China’s manufacturing improved more than expected in July with both state-owned enterprises delivering their best performance in more than two years.

The official Purchasing Managers’ Index, a comprehensive gauge of operating conditions in large industrial companies, was 51.7 in July, the strongest since April 2012, the China Federation of Logistics and Purchasing and the National Bureau of Statistics said this morning.

The HSBC Purchasing Managers’ Index, which represents private sector and small and medium enterprises, was also 51.7 in July, up from 50.7 in June. It was the highest reading since March 2013, HSBC Holdings plc and research firm Markit said.

In both surveys, a reading above 50 means expansion in manufacturing activity.

“Rising PMIs fuel optimism over China’s economy,” said Zhou Hao, an economist at Australia & New Zealand Banking Group Ltd. “The acceleration of fiscal spending should boost momentum. Meanwhile, the policies to bolster lending to targeted sectors have improved market sentiment as well.”

The improvement of the official PMI is broad-based. The components showed output picked up 1.2 points to 54.2 in July, while exports increased for the third consecutive month, suggesting a fast recovery in trade as external demand continues to strengthen.

Although the final reading of HSBC PMI was lower than its flash reading of 52, Qu Hongbin, chief economist for China at HSBC, said China’s economy is improving sequentially and registered across-the-board improvement compared with a month earlier.

“It is the second consecutive month the HSBC PMI pointed to expansion,” Qu said. “Policymakers are expected to continue with targeted easing, and the cumulative impact of these measures will filter through in the next few months to help consolidate the recovery.”

China’s gross domestic product expanded 7.5 percent from a year earlier in the second quarter, compared to 7.4 percent in the first three months.

In the first half, the country’s growth rate was 7.4 percent, largely in line with the government target of 7.5 percent.

The International Monetary Fund yesterday forecast a 7.4 percent rise in China’s GDP this year. ANZ’s Zhou Hao predicted it would be 7.5 percent.




 

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