China manufacturing gauge hits two-year low

China Manufacturing Gauge Hits Two-Year Low

Caixin China manufacturing purchasing managers’ index fell to 47.8 in July from 49.4 in June 2015

China got another dose of bad news about its already-weak manufacturing sector on August 3,2015, as a final measure of factory activity in July slumped to a two-year low.

The Caixin China manufacturing purchasing managers index, a gauge of nationwide manufacturing activity, fell to 47.8 in July from 49.4 in June, Caixin Media Co. and research firm Markit said. A reading below 50 shows contraction from the previous month, while one above 50 signals expansion. This Caixin reading was much worse than an official measure of Chinese manufacturing activity, released Saturday, which came in at 50.0 for July, down from 50.2 in June.

“July data signalled that the downturn in China’s manufacturing sector intensified at the start of the third quarter,” said Caixin in a statement accompanying the data. “Renewed falls in both total new work and new export orders led manufacturers to cut production at the fastest rate since November 2011.”

The key manufacturing sector has been a major factor in the economy’s less-than-stellar performance, reflecting overcapacity in traditional heavy industry such as steel and cement as well as weak demand for exports of the country’s light-industrial products.

Analysts said that Beijing could step up spending on infrastructure and let banks lend out more of their deposits by cutting the reserve requirement ratio.

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