China June HSBC flash PMI shows first expansion in six months as orders surge

Mon Jun 23, 2014 12:23am EDT
 
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BEIJING (Reuters) - Activity in China's factory sector expanded in June for the first time in six months as new orders surged, a preliminary HSBC survey showed on Monday, offering new signs the economy is stabilizing thanks to Beijing's measures to shore up growth.

Still, many analysts expect the government may need to roll out further steps in coming months to offset the risks from a cooling housing market and persistent export weakness, after China's premier vowed last week that the economy would not suffer a hard landing.

The HSBC/Markit Flash China Manufacturing Purchasing Managers' Index rose more than expected to 50.8 in June from May's final reading of 49.4, beating a Reuters poll forecast of 49.7 and creeping above the 50-point level that separates growth in activity from contraction.

It was the first time since December that the PMI was in growth territory, and the highest reading since November, when it was also 50.8.

The upbeat report reinforced market expectations that the world's second-largest economy is powering through its recent soft patch, even if the recovery may be patchy.

"This month's improvement is consistent with data suggesting that the authorities' mini-stimulus is filtering through to the real economy," said Qu Hongbin, chief economist for China at HSBC, referring to a series of measures announced by the government in recent months to spur activity. "We expect policymakers to continue their current path of accommodative policy stance until the recovery is sustained,” he added.

The preliminary factory reading for June indicates sequential growth could pick up to 1.8 percent in the second quarter from 1.4 percent in the first, Ting Lu, an economist at Bank of America-Merrill Lynch, said in a note to clients.

"We expect Beijing to continue rolling out more measures to stabilize growth," Lu added.

The sub-index for new orders, a proxy to measure domestic and foreign demand, rose to 51.8, the fastest pace in 15 months.   Continued...

 
Workers install the chassis along a production line at a truck factory of Anhui Jianghuai Automobile Co. Ltd (JAC Motors) in Hefei, Anhui province May 5, 2014.  REUTERS/Stringer