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Financial News: China's Private Sector Logs Subdued Growth In July

China's Private Sector Logs Subdued Growth In July

08/05/2019 - 03:05:00 (RTTNews)

(RTTNews) - China's private sector continued to log subdued growth at the start of the third quarter, survey data from IHS Markit showed Monday.

The Caixin composite output index rose to 50.9 in July from 50.6 in June. A score above 50 indicates expansion in the sector.

The indicator logged a slight growth reflecting the stabilization in manufacturing output following a drop in June. At the same time, services companies reported a moderate growth.

The services Purchasing Managers' Index fell to 51.6 from 52.0 in June. This was the lowest score in five months.

Composite new orders grew at a moderate pace largely driven by a further increase in new business placed with service providers. At composite level, export orders grew slightly for the second time in three months.

Employment trends across China remained subdued in July, with composite data indicating a marginal reduction in headcounts for the third consecutive month.

On the price front, survey showed that average input prices continued to increase at a moderate pace in July. At the same time, prices charged by Chinese businesses fell for the first time in six months.

Business confidence regarding future output picked up in July, with the overall level of positive sentiment improving to a three-month high. "In general, China's economy showed signs of recovery in July, thanks to large-scale tax and fee cuts, as well as ongoing support from monetary policy and government-driven infrastructure investment," Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group, said.

It remains to be seen if the economic recovery can continue amid trade fictions with the U.S. and rigid regulations on the financial sector and debt levels, Zhong added. The recovery in July suggests that China's economic slowdown is under control.

The People's Bank of China said it can maintain the currency stable at a reasonable level. The renminbi weakened beyond 7.00 against the US dollar for the first time since 2008.

It appears to have decided that, given the increasingly dim prospects of a trade deal with the US, the boost to China's export sector from currency depreciation is worth attracting the ire of the Trump, Julian Evans-Pritchard, an economist at Capital Economics, said.

The devaluation will probably cause capital outflows to accelerate in months ahead to the fastest pace since 2017. "But we aren't too concerned about this," the economist added.

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