China June factory, services surveys fuel hopes economy leveling out

Wed Jul 1, 2015 6:30am EDT
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By Kevin Yao

BEIJING (Reuters) - Activity in China's factory sector expanded slightly in June though not as much as expected, while growth in the services sector sped up, official surveys showed, offering some signs that the world's second-largest economy may be starting to slowly level out after a raft of support measures.

Beijing has rolled out a flurry of steps since last year, including interest rate cuts and more infrastructure spending, but analysts remain wary about the outlook given the still-weak property market, erratic global demand for China's exports and fears of a collapse in its wild stock market.

The government is due to release second-quarter gross domestic product data on July 15 and many economists expect growth to dip below 7 percent, which would be the weakest performance since the global financial crisis.

"In general, the softness in the manufacturing sector remains, requiring more policy recalibration", Liu Li-Gang and Zhou Hao at ANZ said in a research note.

"Looking ahead, as real interest rates faced by Chinese companies remain elevated, we see that further monetary easing is still highly needed".

With demand weak at home and abroad, factory growth remained tepid, with the reading just above the 50 point level that separates contraction from expansion on a monthly basis.

The official Purchasing Managers' Index (PMI) stood at 50.2 in June, unchanged from the previous month's reading, the National Bureau of Statistics. Analysts polled by Reuters had predicted it would edge up to 50.3.

"Business development momentum is still insufficient, and domestic and foreign demand remains weak", the bureau said.   Continued...

Employees work at a walling material factory in Jiaozuo, Henan province March 12, 2015. REUTERS/China Daily