A key measure of Chinese manufacturing surged to its highest level in seven months in June, easing pressure on the government to implement further measures to avert possible economic slowdown.
The initial Purchasing Managers’ Index, compiled by Markit Economics and HSBC Holdings Plc, stood at 50.8, compared to May’s final reading of 49.4. A reading above 50 shows expansion.
Chinese Premier Li Keqiang signaled last week that the government would rely on targeted regulation to spur economic growth rather than introduce “strong” stimulus.
The report triggered a temporary surge in stock prices before speculation that liquidity restrictions in the banking sector and a property slump would drag down economic growth erased the gains.
The Flash PMI reading relies on 85 percent-90 percent feedback on surveys that is given by purchasing managers in over 420 companies. The final figures are expected on July 1.
“It is a very good number,” said Dong Tao, a Hong Kong-based chief regional economist for Asia ex-Japan at Credit Suisse Group AG told Bloomberg. “It is a surprise, too, as most people are focusing on infrastructure investment and the property market.”
The report showed that sub-indexes for new orders and output increased while those of finished goods stocks fell. Fresh export orders grew much slowly and prices of inputs accelerated.
The report prompted Barclays and JPMorgan to revise their growth forecasts upwards as indicators showed that the government’s intervention will ensure the economy grows at 7.5 percent despite slowdown in property market and fixed-asset investment.
Barclays expects China’s economy to grow by 7.4 percent this year up from the initial estimate of 7.2 percent, while JPMorgan forecasts growth to hit 7.2 percent in the second quarter, up from 6.8 percent. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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