China June PMI Hits Seven Months High

Today HSBC published the market flash Purchasing Manager Index (PMI) for the month of June. The data shows that China's PMI for the month of June rose to 50.8 from May's final reading at 49.4. This shows that the manufacturing downturn has eased now and expanded in June for the first time in the last seven months. It was the first time this year that it moved above the 50 mark.

As per the HSBC data released, the Chinese manufacturers recorded an increase in both output and new orders in the month of June of this year. The export orders have also increased but at a slower rate. This shows that the improvement in external environment has also helped the Chinese firms during this month. Due to an increase in the new orders, this has led the companies to increase their purchasing activity in the month of June. Though the domestic orders and export orders were all higher for this month, the employment remained weak for June 2014.

The input costs and the output prices for the Chinese economy have increased during the month of June, but the increase was at a slower rate. The suppliers' delivery time is lengthening. This may indicate that as the demand is increasing suppliers are busy and are unable to meet their orders within time.

Commenting on the data, Hongbin Qu, Chief Economist for China at HSBC said, “The improvement was broad-based with both domestic orders and external demand sub-indices in expansionary territory. Inventory reduction quickened, and the employment sub-index also showed signs of stabilisation. This month's improvement is consistent with data suggesting that the authorities' mini-stimulus are filtering through to the real economy. Over the next few months, infrastructure investments and related sectors will continue to support the recovery. We expect policy makers to continue their current path of accommodative policy stance until the recovery is sustained."

From the above we can say that the economic conditions of China have started to show some sign of growth during June of this year. But the growth is still at lower rate. The growth was not backed by strong inflow of new orders from domestic as well as from overseas market. So maintaining the growth at the same rate will be tougher for China in the coming months.