Manufacturing at China’s big state-owned firms, hit by flooding, contracted in July, while private manufacturers’ activities brought cheer as they marked their first expansion since February 2015, two surveys showed on Monday.
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A PMI reading above 50 indicates an expansion in manufacturing activity, while a reading below 50 points to a contraction.
That’s up sharply from 48.6 in June, and it easily beat expectations for 48.9.
“At the end of the day, in order to deliver decent growth, China needs to boost the domestic demand via fiscal spending”, Zhou Hao, a senior emerging-markets economist at Commerzbank AG, said.
Factory output fell to 52.1 in July from 52.5 in June, and total new orders hovered just inside expansionary territory at 50.4, slightly down from June’s 50.5, the PMI showed.
The subindex for services rose to 52.6 from 52.2 in June and the subindex for construction decreased to 61.1 from 62.0, the statistics bureau said.
The sub-indexes of output, new orders and inventory all surged past the neutral 50- point level that separates growth from decline.
Job losses could be rising as the government has pledged broad capacity cuts across a range of industries.
A mixture or banks, consumer discretionary and industrial focused companies will report second quarter and first half numbers in Europe over the coming days.
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China is counting on growth in services to offset persistent weakness in manufacturing that is dragging on the economy.
