China's factory sector barely expanded in June even as price pressures eased, a purchasing managers' survey showed on Thursday, reflecting the impact of monetary policy tightening and slack global demand. The flash HSBC PMI, the earliest available indicator of China's industrial activity, eased to 50.1 in June, the lowest since July 2010.
A sub-index for new orders also dropped to its lowest since July 2010, showing marginal growth. The flash PMI reading was just a whisker above the 50-point level that demarcates expansion from contraction and compares with the final reading of 51.6 in HSBC's PMI for May.
"It certainly was not a great number," said Robert Prior-Wandesforde, an economist at Credit Suisse in Singapore, who added the data was symptomatic of a further slowing of China's economic activity. "It fits with the broader picture of weakness not just in the developed world but also in the emerging world as well." Still, analysts said the slowdown in China was orderly and acceptable to authorities, leaving them on course to focus on policy tightening to combat stubbornly high inflation.
Financial markets showed a muted reaction to the data. The Australian dollar eased modestly against the US dollar on concern Australia's major trading partner was losing steam. For markets more broadly, the latest sign of a slowdown in the world's second-biggest economy provided another reason for investors - already worried by the risk of a Greek debt default and weakening growth in the United States - to be cautious.
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