2019.08.0100:35:00UTC+00China's Manufacturing Sector Logs Marginal Contraction

China's manufacturing sector contracted slightly in July largely reflecting the broad stabilization of output, survey data from IHS Markit showed Thursday.

The Caixin factory Purchasing Managers' Index rose to 49.9 in July from 49.4 in June. Nonetheless, a reading below 50 indicates contraction.

The official data released Wednesday showed that factory PMI came in at 49.7 in July, up from 49.4 in June. Meanwhile, the non-manufacturing PMI fell to 53.7 from 54.2 in June.

Private survey showed that production was little-changed following a decline in June amid a slight increase in overall new orders, the survey showed.

Driven by stronger domestic demand, total new orders grew at a fractional pace. Meanwhile, the ongoing trade dispute with the US continued to weigh on exports.

However, subdued demand conditions prompted firms to lower their workforce numbers for the fourth straight month in July. Respondents cited lack of personnel as a key reason for further increase in unfinished work.

Chinese manufacturers said their average input costs rose again in July but the pace of increase was marginal.

At the same time, efforts to stimulate customer demand and boost new order intakes led firms to cut their selling prices for the first time since January.

Although business confidence improved from June's record low, it remained subdued due to concerns regarding the China-US trade dispute and softer global economic conditions.

Despite the modest improvement in the manufacturing PMIs for July, they still appear consistent with a renewed slowdown, Julian Evans-Pritchard and Martin Lynge Rasmussen, economists at Capital Economics, said. This should keep policymakers in easing mode.