Factory activity in China shrank for the third consecutive month in July to its lowest level in almost a year as new orders fell, a private survey showed on Thursday.
The HSBC Purchasing Managers' Index, or PMI, compiled by Markit Economics Research, dropped to 47.7 in July from June's 48.2, revealing that the relentless pressure on China’s economy has made its way into the third quarter, Reuters reports.
A reading below 50 shows a contraction of activity while a reading higher than that reveals expansion. This latest reading, according to several news outlets, was the weakest one since August 2012, and it matched a preliminary figure published last week.
"With weak demand from both domestic and external market, the cooling manufacturing sector continued to weigh on employment," said Hongbin Qu, China chief economist at HSBC, Reuters noted. Meanwhile, China's government has introduced policies to boost spending in urban infrastructure, social housing, high-speed rail and energy-saving industries, while offering tax breaks for small firms, Reuters reports.
"These targeted measures should boost confidence and reduce downside risks to growth," Qu said. New orders shrank to 46.6 in July, a third straight contraction that brought the sub-index to its lowest level since August of last year.
As exporters coped with weakening demand, especially from the U.S. and Europe, new export orders shrank for a fourth month in July, and at a rate that hasn't been that rapid since October 2012. According to the survey, a sub-index measuring employment contracted for a fourth month to its weakest since March 2009, according to Reuters.
A separate PMI survey released by the National Bureau of Statistics earlier on Thursday showed the index rising to 50.3 in July from 50.1 in June.