China’s PMI shows continuing economic revival - analysts

03 August 2009 08:38  [Source: ICIS news]

SHANGHAI (ICIS news)--China’s Purchasing Managers’ Index (PMI) was reported at above 50% for the fifth consecutive month in July as the country's economy continued to show signs of recovery, analysts said on Monday.

The country's PMI for July was 53.3%, up from 53.2% in June, data from the China Federation of Logistics and Purchasing (CFLP) showed on Saturday.

The PMI serves as a barometer for the monthly performance of China’s factories and is based on surveys from purchasing and supply managers at more than 700 manufacturers across the country. A reading of above 50% suggests economic expansion, while one below 50% indicates contraction.

"The July PMI indicated a continual recovering stance.... The rebound track will be sustained in the next months along with increasing domestic demand," Zhang Liqun, a researcher from the Development Research Centre of the State Council, said.

Among the 20 sectors of the PMI, the index for new orders in July was 55.5%, flat over June, while the production index reached 57.3%, up from 57.1% in June, according to the CFLP.

"The PMI data may continue rising in August and exceed 55% in September on the back of strong support from domestic demand," Dong XianAn, an analyst from Industrial Securities, said in Mandarin.

"Import and export declines may narrow down in the second half of year with the new export order index showing 52.1% in July, 0.7 percentage points higher than June," Dong said.

"Meanwhile, we forecast the growth rate of gross domestic product (GDP) to surge to 9.9% for the third quarter and 9% for the whole year on the development of fixed asset investment (FAI) and other stimulus packages," he added.

Full-year new loans would reach more than yuan (CNY)9,000bn, doubling figures from 2008, Dong said.

Yi Lei, an economist from Beijing-based Shanxi Securities said: "The government will not allow a second bottoming out of the economy in the latter half of this year. Large government investment helped drive the economy in the first half of this year while private investments will show a large growth in the second half of this year."

A report from the Bank of Communication said that the GDP growth rate for the third quarter of the year was expected to reach 9%.

Judith Wang contributed to this article

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