China’s Factory Gauge Edges Up Amid Ongoing Growth Concerns

(Bloomberg) — The first official indicator of China’s economy in the second half of 2019 showed conditions for factories improved slightly amid an ongoing government push to support the sector as it suffers from weak global demand and the U.S. trade war.

The manufacturing purchasing managers’ index rose to 49.7 in July, led by better conditions for large companies. The below-50 reading still signals contraction, though is better than the median estimate of 49.6 in a survey of economists. The non-manufacturing gauge fell to 53.7.

A gauge of new export orders rose to 46.9 from 46.3, with the stronger result signaling some optimism just as trade talks with the U.S. resume in Shanghai. The Communist Party’s politburo meeting on Tuesday pledged to tackle ongoing tensions over trade “effectively” while offering incremental additions to stimulus policies.

“The PMI reading is unlikely to dispel growth concerns,’’ said Zhou Hao, a senior emerging market economist at Commerzbank AG in Singapore. “High frequency data, such as weekly car sales, still point to somewhat weakening industrial activities and domestic demand.”

July has more working days than June, which could also have helped lift production. Measures for output, new orders, employment, imports, purchasers’ quantity, input and export prices, backlogs of work and business activity expectation all improved from a month earlier. Still, small and medium enterprises saw a deterioration in conditions.

“Stimulus is having a positive impact, though a return to strong expansion is not coming anytime soon,’’ said Patrick Bennett, head of macro strategy for Asia at Canadian Imperial Bank of Commerce in Hong Kong. “Signs of stabilization in recent activity data continue with this result.”

Contact editor Yang Ge (geyang@caixin.com)