BEIJING: Chinese manufacturing activity saw a slight improvement in June, official data suggested on Wednesday, but analysts said more stimulus to the world’s number two economy would likely be needed to re-energize the sector.
The official Purchasing Managers’ Index (PMI) released by the National Bureau of Statistics (NBS) came in at 50.2 last month, matching May’s six-month high.
The index, which tracks activity in factories and workshops, is seen as a key barometer of the country’s economic health. A figure above 50 signals growth, while anything below indicates contraction.
Production increased steadily in June with high-technology and consumer product-related industries picking up, said senior NBS analyst Zhao Qinghe in a statement.
But “companies’ intrinsic growth momentum was still insufficient as demand from both domestic and foreign markets remained relatively weak,” Zhao said.
“The difficulties faced by firms in their production and business management are yet to be mitigated effectively,” Zhao said, adding more companies complained about limited liquidity.
A separate, independent survey sponsored by British banking giant HSBC was less positive, showing manufacturing conditions continued to deteriorate in June, albeit at a slower rate.
Its final PMI figure registered 49.4 in June, up slightly from May’s 49.2 and the strongest since 49.6 in March, as overall demand improved tentatively, said a statement released by Markit, an information services provider that compiled the survey.
But it was lower than the preliminary June reading of 49.6 and was the fourth consecutive month that HSBC’s gauge has indicated contraction.
The figure “pointed to a further decline in the health of the manufacturing sector in June,” Markit economist Annabel Fiddes said in the statement.
This was predominantly driven by the sharpest rate of job shedding across the sector since early 2009, while output also fell slightly on the month.
“It is likely that more stimulus measures will be required to ensure that the sector can regain growth momentum and to encourage job creation,” she added.
China’s economic growth slowed to 7.4 percent in 2014, the weakest rate in 24 years. In the first quarter it eased further to 7.0 percent, a post global financial crisis low, prompting further interventions by Beijing to bolster growth.
The People’s Bank of China on Saturday announced interest rate cuts of 0.25 percentage points—the fourth reduction since November.
It also reduced for the third time this year the amount of cash banks must keep in reserve, in a bid to kickstart lending.
The government is slated to release April-July GDP growth data on July 15.