Surveys Show Chinese Manufacturing Weak in July

In this Wednesday, July 27, 2016 photo, workers assemble sneaker at a factory in Jinjiang city in southeast China’s Fujian province.

“So even if the cloud cast by the Brexit decision lifts, it is possible the United Kingdom economy had already begun to lose momentum, despite the encouragement offered by the second-quarter GDP growth number released last week, a figure which will be subject to two further revisions”, he said.

The Nikkei/Markit Manufacturing Purchasing Managers’ Index (PMI) surged to 51.8 in the month of July compared to June’s 51.7, marking its 7th month beyond the 50 level which segregates growth from contraction.

The price continues to drop inside the minor descending pitchfork, is expected to drop till will react the 50% retracement level and the lower median line of the Daily descending pitchfork, could find temporary support at the mentioned support level, any drop below these obstacles will attract more seller’s which will drive the rate toward fresh new lows in the coming period.

“The government has realized the downward pressure is great but they’ve also realized that stimulus to stimulate the economy continuously is not a good idea and they want to continue to focus on reform and deleveraging”, Zhao said.

Analysts said Chinese manufacturing was hampered by summer flooding along the Yangtze River and weak global demand.

Industrial profits rose at the fastest pace in three months in June, but gains were concentrated in just a few industries including electronics, steel and oil processing.

Indeed, the PMI showed factory output in July still expanded solidly, though the pace cooled to 52.1 from 52.5 in June.

A reading above 50 signals expanding activity, while anything below indicates shrinkage.

A private PMI survey by Caixin/Markit was more mixed.

A sub-index for smaller firms fell, while performance at larger companies improved, a sign that the government’s dependence on big state firms for growth this year has not changed.

“Purchasing activity took a backwards leap with the sharpest drop since March 2013, as falls in both output and new orders battered the sector”, said David Noble, group chief executive officer at the Chartered Institute of Procurement & Supply.