China Factory estimate Hits 15-Month Low in July

Chinese factory production contracted at the steepest pace in 15 months in July, according to a survey of purchasing managers, highlighting why economists expect to see further efforts to stimulate growth in the coming months.

The Caixin China manufacturing Purchasing Managers' Index (PMI) rose from 49.4 in June to a preliminary 48.2 in July, where a figure below 50 signals a contraction in activity, while a reading above 50 indicates expansion.

Output continued to decrease, but at a faster rate in July than June, while overseas orders and overall orders declined in July after increasing in June. Employment levels continued to decline in July, but at a slower pace than in June. Deflationary pressures increased in July, with both input and output prices declining.

Since November the People's Bank of China (PBoC) has lowered interest rates four times, and has cut the Reserve Requirement Ratio (RRR) for banks twice, and a third time for banks that lend to certain sectors where the government is trying to promote growth in, such as agriculture.