Official China PMI expected to show manufacturing shrunk in July

The official China PMI, due out on Thursday, is predicted to show the country’s manufacturing sector contracted for the first time in ten months.

The official PMI focuses on larger and state-owned factories, whereas the HSBC/Markit survey – which came out last week, with a result of 47.7 – focusses mainly on SME factories. Any result under 50 indicates negative growth.

Four economists polled by CNBC predicted a result of between 49.2 and 49.8. Reuters also surveyed 12 economists, with 49.9 the median prediction.

Liquidity conditions are making it difficult for smaller manufacturers to secure finance to invest in their operations, and this has been explained as the reason the official PMI has lagged the HSBC result.

The HSBC survey has shown three consecutive negative results.

“We expect growth in the manufacturing sector to weaken further in the third quarter," Chenm Letian of Rising Securities in Beijing told Reuters.

"The broader economy still faces downward pressures despite the recent government policies to support growth, although activity may stabilise in the fourth quarter."

Prices for commodities such as copper – 40 per cent of which ends up in China – have dipped lately due to China’s slowing growth, reports the Financial Times

Image: Wired