China June official PMI hits 7-month low

Sun Jul 1, 2012 8:18am EDT
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BEIJING (Reuters) - China's factory downturn worsened in June as a key activity index hit a seven-month low, data expected to raise expectations the central bank may seek more policy easing to revive the world's second-largest economy.

The official Chinese purchasing managers' index (PMI) fell to 50.2 in June after seasonal adjustments, the National Bureau of Statistics said on Sunday, above forecasts for 49.8, but down from May's 50.4.

That was the worse reading since November last year, and a sharp fall in export orders and shrinking new orders suggested a recovery is not in sight. This would fuel bets that Beijing could further relax monetary policy as soon as this month, an analyst said.

"New orders and input prices are still falling, which show there are still many factors affecting production. A recovery in industrial output would take time," Zhang Liqun, a government researcher, said in a statement accompanying the PMI data.

Zhang's cautious tone backed estimates among some analysts that China's economy could worsen in the third quarter as previous policy easing takes time to filter through, potentially jeopardizing Beijing's 2012 growth target of 7.5 percent.

A protracted slowdown in China would further hobble a world economy already bruised by Europe's nagging debt crisis, and an ailing U.S. economic recovery. It is also a headache for Beijing as exporters are mainstay employers in China.

Sunday's PMI suggested Chinese factories struggled with lackluster foreign and domestic demand in June.

The sub-index for new export orders had its biggest monthly fall since December, shedding 2.9 percentage points to 47.5. New orders, which include domestic orders, slipped 0.6 percentage points to 49.2.

This means factories received fewer orders in June from May as the 50-point level separates expansion from contraction.   Continued...

A farmer works at a pig farm on the outskirts of Shenyang, Liaoning province June 9, 2012. REUTERS/Stringer