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China’s official manufacturing PMI moderated to 51.2 in July from 51.5 in June on weaker production activity, notes the research team at Standard Chartered.

Key Quotes

“The production sub-index eased by 0.6ppt to 53.0. The demand outlook appears to have dimmed, with the new orders PMI dropping 0.9ppt and the imports PMI falling below the 50 threshold.”

“New export orders stayed at 49.8, suggesting weaker external support. Furthermore, the non-manufacturing PMI ended its five-month-long uptrend, edging down 1.0ppt to 54.0 due to a slowdown in services and construction activity.”

“Although the official PMIs weakened in July, real activity may have picked up on a favourable base effect and supportive measures such as the reduction of tariffs on automobiles and selected consumer goods, which became effective at the start of July.”

“We expect retail sales to have improved further in the month. Industrial production (IP) growth may have edged up mainly on a low base.”

“We expect fixed asset investment (FAI) growth to have improved on an infrastructure investment recovery. Local-government bond issuance accelerated in July.”

“CPI inflation likely inched up in July on higher non-food inflation. The services selling prices PMI rose to its highest level since February. Meanwhile, PPI inflation may have eased due to a high base.”

“The trade data likely softened due to mutual trade tariffs imposed by China and the US.”

“We expect money and credit growth to pick up due to the 0.5ppt reserve requirement ratio (RRR) cut and the authorities’ issuance of guidance on support for SME financing.”