Caixin China PMI surprises with drop to 2-year low in July

The Caixin China manufacturing purchasing managers index, a gauge of nationwide manufacturing activity, fell to 47.8 in July from 49.4 in June, Caixin Media Co. and research firm Markit said.

Both indicated that manufacturers shed workers in July, though the official data suggested the employment situation had become worse, with the sub-index down 0.1 points from the previous month.

An index measuring output that feeds into a composite PMI due on Wednesday and seen as a good guide to growth held steady at June’s 53.6, surpassing the preliminary 53.4 reading.

“I feel that the macro outlook of China – which is probably slowing further – has already been considered by the market”, he said in a note on Monday.

But Condon said the factory weakness may be transitory if unprecedented stock market support measures from Beijing in recent weeks succeed in halting panic selling.

Risk sentiment was also dampened by the tepid US wage growth figures released at the end of last week, which showed labour costs in the world’s largest economy recorded their smallest increase in 33 years in the second quarter.

China will likely be saved by infrastructure investment again.

“We need to be much more modest on expectations with regard to China growth; that’s just being realistic”, he said.

Uncertainty over the country’s future relationship with the eurozone sent Greek manufacturing into a tailspin in July, but that had little impact on other parts of the currency area’s economy, as Italian factories had their best month in more than four years.

Dragged down by China, Asian markets are in the red this morning.

The deterioration in China’s vast manufacturing industry comes despite the government recently intervening heavily to boost the economy and stock market.

The final results of a survey of purchasing managers at eurozone factories released Monday showed activity grew slightly more rapidly than first estimated, and roughly in line with June.

In an acknowledgement of difficulties ahead, the Politburo, one of the Communist Party’s elite ruling bodies, promised last week to step up policy adjustments to keep growth stable. Beijing has a 2015 growth target of “around 7%”.