The Caixin China Manufacturing Purchasing Managers' Index's initial reading stood at 48.2 in July, compared with a final reading of 49.4 in June, Caixin Media Co. and research firm Markit said Friday. A reading above 50 indicates expansion from the previous month, while a reading below 50 indicates contraction.
Subindexes for output, new orders, new export orders and employment all showed declines during the month.
"It was much lower than expected," said Jacqueline Rong, an economist with BNP Paribas. "It means that the industrial sector has not yet found its footing."
The State Council, China's cabinet, unveiled policies to support trade, including restating a pledge to widen the narrow trading band within which the Chinese currency, the yuan, trades against the dollar. The statement didn't mention a time frame for the move.
The low reading suggests that the economy has yet to regain momentum despite several rounds of interest rate cuts, higher spending on infrastructure and signs that the real-estate market is emerging from a slump. It's also likely to further cast doubt on the 7% growth the government reported for the second quarter after other indicators, from industrial production to investment in factories and buildings, pointed to persisting weakness.
"Policy easing clearly is not working," said Kevin Lai, an economist at Daiwa Capital.
Ms. Rong and other economists said more easing measures and other policy support will likely be rolled out in the coming months after Communist Party leaders hold key meetings over the summer at a seaside resort.
The Caixin PMI draws more heavily on private firms--a sector the government wants to see generate growth--rather than the official PMI, which favors large state companies and which is scheduled to be released next week.
Grace Zhu and William Kazer
(END) Dow Jones Newswires
July 23, 2015 23:09 ET (03:09 GMT)
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