China June factory activity shows signs of stabilization

Tue Jun 23, 2015 1:40am EDT
 
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By Pete Sweeney

SHANGHAI (Reuters) - China's factory activity showed signs of stabilizing in June, with two private surveys suggesting the economy may be regaining some momentum even as many analysts expect further policy support to ensure the recovery becomes more sure-footed.

The HSBC/Markit Flash China Manufacturing Purchasing Managers' Index (PMI) edged up to 49.6 in June, a three-month high, from 49.2, but remained below the 50 mark which separates contraction from expansion.

New orders returned to positive territory at 50.3 and new export orders fell at a much slower pace.

"The pick-up in new orders was driven by a strong rise in the new export orders subcomponent, suggesting that foreign demand may finally be turning a corner," wrote Capital Economics analysts in a research note.

"Today's PMI reading reinforces our view that the economy has started to find its footing."

However, companies stepped up layoffs, shedding jobs at the fastest pace in over six years, and Capital Economics' analysts said they expect further easing measures in the pipeline.

"Manufacturers continued to cut staff. This suggests companies have relatively muted growth expectations," said Annabel Fiddes, an economist at Markit, adding that she expects Beijing to "step up their efforts to stimulate growth and job creation."

  Continued...

 
Employees work at a steel factory in Dalian, Liaoning province in this March 16, 2015 file picture. REUTERS/China Daily/Files