New Orders Strengthen China's Manufacturing PMI to 18-Month High in July

Conditions in the Chinese manufacturing sector continued to improve as new businesses where placed with Chinese goods producers, according to the HSBC China Manufacturing Purchasing Managers' Index.

The index rose to an 18-month high of 51.7 in July, from 50.7 in June, signaling a further improvement in the health of China's manufacturing  sector.

Output and total new orders both rose at the strongest rates since March 2013, while new export work increased at the second fastest pace in over three-and-a-half years.

In response to stronger inflows of new work, purchasing activity rose solidly while job shedding eased for the second successive month and was only slight.

Meanwhile, input price inflation accelerated to the strongest since last November.

Furthermore, it was the strongest rate of improvement for a year-and-a-half.

Chinese manufacturers signaled a second consecutive monthly rise in production during July. The rate of output growth accelerated from June to the quickest in 16 months.

Greater volumes of new work

A number of panelists suggested that production rose in line with greater volumes of new work, which was highlighted by a solid increase in total new business placed at Chinese goods producers.

New work from abroad also rose at a faster pace in July, with the latest expansion of new export order books the second-strongest in 44 months.

Purchasing activity increased for the third month running in July. Furthermore, the rate of increase accelerated to the fastest since last October.

Anecdotal evidence suggested that input buying rose in line with stronger inflows of new work and subsequent plans to raise productive capacity. As a result, stocks of purchases increased, albeit marginally, following no change in June.

Encouragingly, job shedding at Chinese manufacturing companies eased in July, with the latest fall in workforce numbers the weakest since March.

Meanwhile, capacity pressures persisted, as signalled by a second successive monthly increase in backlogs of work. That said, the rate of accumulation was similar to that recorded in June and only slight.

Latest survey data pointed to the fastest rise in average cost burdens since last November in July. Companies partly passed on their higher cost burdens to clients by raising their output charges slightly over the month.

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