Manufacturing sector continued output and new orders downtrend in July : Nikkei Index


Any gains above 50 in this index will indicate improvement and recovery in the sector and any movement below that mark would indicate contraction.

But the broad consensus among China watchers is that economic growth will cool in coming months as a government crackdown on financial risks raises borrowing costs for businesses and squeezes profits.

On the whole, while China's manufacturing sector has remained resilient, companies' outlook has now worsened or held steady since hitting a almost two-year high in February.

Companies hired more staff for the third successive month in July, leading the sector towards its second successive rise in output.

Manufacturing activity in July slowed to 47.9, the lowest level since February 2009, according to the Nikkei Manufacturing Purchasing Managers' Index, due nearly entirely to the introduction of the Goods and Services Tax on July 1.

External demand growth retreated, with the sub-index for new export orders falling to 50.9 from 52 in June, but the reading has stayed above 50 for the last nine months. They attributed the rise to a solid upturn in new export sales. Official services PMI meanwhile fell to 54.5 in July from 54.9 in June.

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Prices rose 1.3 percent last month, official data showed on Monday, while unemployment in June dropped to its lowest level since 2009, confirming the economy's robust recovery and giving the European Central Bank more ground for tightening its monetary policy in the autumn. Mr. Zhao projects "a significant slowdown" next year, with growth slipping to 6.2%. It is expected that the index will fall back to 56.4 after a bullish reading around 57.8 last month.

A Caixin/Markit survey covering China's services sector will be released on Wednesday.

The Chicago business barometer, a closely-watched indicator by the Institute for Supply Management (ISM) slipped to 58.9 in July from a three-year high of 65.7 in June, MNI indicators showed on Monday.

"The shift between the old and new momentum of growth is accelerating", Chen commented.

Markets in Asia finished higher on Tuesday, with investors digesting strong manufacturing data out of China, as the ongoing political instability in the USA appeared to become more pronounced overnight.