July Caixin Mfg PMI At Highest Since March On Strong Exports

     BEIJING (MNI) - Operating conditions in China's manufacturing sector

improved in July due to robust output and a solid upturn in new export sales,

according to the latest Caixin Manufacturing Purchasing Managers' Index (PMI)

released Tuesday.

     However, business outlook sentiment edged down to its lowest level in 11

months, Caixin said. 

     The headline manufacturing PMI rose to 51.1 in July from 50.4 in June, the

strongest reading since 51.2 in March. It was also above the 50.6 reading last

July, according to data compiled by IHS Markit for Caixin.

     Readings above 50 indicate expansion in the manufacturing sector while

readings below 50 indicate contraction. The higher the PMI reading above 50, the

faster the expansion in the sector. The lower the reading below 50, the faster

the contraction.

     The rise in the Caixin index -- which focuses on smaller and medium-size

companies -- was not in line with the results of the official manufacturing PMI

jointly released on Monday by the China Federation of Logistics and Purchasing

and the National Bureau of Statistics. The CFLP/NBS PMI came in below

expectations at 51.4 in July, down from from 51.7 in June, mainly due to

sluggish new exports.

     The Caixin index showed that new export sales increased at the

second-fastest rate since September 2014. "Panelists widely commented on an

improvement in market conditions and strong foreign demand," Caixin said. 

     As a result, both output and new orders rose at the fastest rates for five

months. 

     Manufacturers increase their purchasing activity in July at a faster pace

than in June, contributing to a renewed increase in input stocks.

     "A number of companies mentioned rebuilding their inventories due to

stronger client demand," Caixin noted, adding "stocks of finished items declined

slightly, as some firms commented on using current inventories to fill new

orders."

     But inflationary pressures ticked up, with both input prices and output

charges rising at faster rates than in June, Caixin warned. 

     Input costs increased at the fastest pace in four months. Manufacturers

complained about higher raw material prices, so companies raised output prices

for the second consecutive month.

     Companies took a relatively cautious stand on employment, with staff

numbers falling in July, although Caixin said that "Backlogs of work continued

to increase at a modest pace similar to that seen in June." 

     "Operating conditions in the manufacturing sector improved further in July,

suggesting the economy's growth momentum will be sustained. That said, it is

unlikely that financial regulatory tightening will be relaxed," said Zhong

Zhengsheng, director of Macroeconomic Analysis at CEBM Group, a research

subsidiary of Caixin.

     The Caixin Manufacturing PMI is based on data compiled from monthly replies

to questionnaires sent to purchasing executives at more than 500 manufacturing

companies.

--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com

--MNI Beijing Bureau; +86 (10) 8532-5998; email: vince.morkri@marketnews.com

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