HSBC's Flash China manufacturing purchasing managers index, the first significant set of data in the third quarter, r ose to 49.5 in July from 48.2 in June, closer to the 50 level that divides expansion from contraction. The increase was driven by a jump in the output sub-index to 51.2 - the best showing since October 2011.
The PMI "adds to recent signs of stabilization of the Chinese economy, thus underpinning our view that the slowdown in activity will bottom out over the summer months," said Nikolaus Keis at UniCredit.
Chinese economic growth in the second quarter cooled to 7.6 percent from a year earlier, its slowest pace in more than three years, but still way ahead of the United States and the euro zone, which has likely fallen back into recession.
For Nomura's chief China economist, Zhang Zhiwei, the PMI provided further evidence that a slowdown in China's economy bottomed out in the second quarter of 2012. "This suggests the effect of policy easing is being transmitted to the economy and reinforces our view that growth has bottomed in Q2," Hong Kong-based Zhang said.
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