China Manufacturing Numbers Better Than Expected: What Slowdown?

Chinese Manufacturing
Chinese PMI was at a seven month high in June. Reuters

One of the most widely followed metrics of Chinese economic health came in Monday much stronger than analysts had expected, helping alleviate fears that slowing Chinese growth could drag down the global economy.

The Chinese Purchasing Managers Index (PMI) for June came in at 50.8, up from 49.4 in May and marking a seven-month high. A PMI above 50 signals an increased growth rate while a reading below 50 signals contraction.

This marks the first time this year that PMI data, published by HSBC Holdings PLC and Markit, from the world's second-largest economy has been above 50, the Wall Street Journal said.

"We observed a bounce-back of confidence in the economy, which will help bolster demand," Lu Ting, economist at Bank of America Merrill Lynch, said to the Journal.

According to Markit, the second-quarter average of 49.4 is up from 48.7 posted in the first quarter. The June PMI was bolstered by domestic demand for new orders while new export orders only showed a slight growth, whereas May's growth was due to increased export demand.

Recent government stimulus plans have also helped Chinese manufacturing, the Journal said. Some of these stimulation programs include tax breaks, faster approvals, spending on railways and small business relief. Based on the recent numbers, the targeted 7.5 percent growth in 2014 can be achieved, Markit said.

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