HSBC China flash PMI, a gauge of manufacturing conditions, climbed to an 18-month high of 52 in July, from 50.7 the previous month.
This beat expectations for a rise to 51. A reading below 50 indicates contraction.
New orders and export orders climbed at a faster rate.
“Economic activity continues to improve in July, suggesting that the cumulative impact of mini-stimulus measures introduced earlier is still filtering through,” Hongbin Qu, HSBC China economist said in a press release. “We expect policy makers to maintain their accommodative stance over the next few months to consolidate the recovery.”
PMI also acts as a sentiment indicator, Bank of America’s Ting Lu said in a note to clients. “Due perhaps to the escalation of supportive policies from Beijing, sentiment in the economy and financial markets have been noticeably improved.”
The recent surge in Chinese credit has prompted some economists to say that growth has again become Beijing’s top priority. Beijing has a 7.5% growth target for the year.
Here’s a breakdown of the sub-indices:
Here’s a look at the improvement in Chinese manufacturing.