Chinese factories face headwinds in July, Europe withstands Greek turmoil

Mon Aug 3, 2015 6:09am EDT
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By Jonathan Cable and Ian Chua

LONDON/SYDNEY (Reuters) - Economic headwinds facing Chinese manufacturers intensified last month, with conditions deteriorating to their weakest level in two years, while euro zone factories largely shrugged off Greece's brush with bankruptcy.

July was a fraught month for the global economy, with Athens and its creditors taking debt talks to the brink, while Chinese ructions triggered slides in commodity prices - hitting countries reliant on demand from the world's second-biggest economy.

China's factory activity shrank more than initially estimated in July as new orders fell, dashing hopes the economy may be steadying, a private survey showed on Monday.

The final Caixin/Markit China Manufacturing PMI came in at 47.8 in July, from 49.4 in June. A similar official survey at the weekend was also weaker than expected, suggesting growth had stalled.

Both indicators signaled a slowdown in factory activity at a time when Beijing has been intervening heavily to prevent a full-blown crash in the country's stock markets.

"They are distorted numbers due to the stock market panic. If that's the case, it's a transitory dip and given the amount of stimulus that has been put in place, we should expect a bounce back in the August numbers," said ING economist Tim Condon.

"But the economy can hardly afford much of a headwind, so probably it brings forward the timing of when people expect the next (policy) move from the authorities."

China's central bank has already cut interest rates four times since November and repeatedly loosened restrictions on bank lending in its most aggressive stimulus campaign since the global financial crisis.   Continued...

A man watches a board showing stock prices at a brokerage office in Beijing, China, July 1, 2015.  REUTERS/Kim Kyung-Hoon