China factory growth eases in July as export demand slips

Chinese factory activity eased in July as export demand weakened while momentum in service industries also waned, according to official surveys out Monday, indicating that the world's No. 2 economy is struggling for traction.

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The monthly purchasing managers' index slipped to 51.4 last month from the prior month's 51.7, based on a 100-point scale on which numbers above 50 indicate expansion.

It was still the 12th straight month that factories reported expansion, according to the data compiled by the Federation of Logistics & Purchasing posted on China's official statistics website.

The survey found that new export orders dropped by a wider margin than overall new orders.

Zhao Qinghe of the National Bureau of Statistics said other factors that contributed to the slower growth last month include heavy rain and floods in some parts of China and high temperatures in other areas as well as routine equipment maintenance at factories.

China's outsize manufacturing sector employs tens of millions of workers and the index is widely watched as an early indicator of the health of the economy, the world's second biggest. Earlier this month, official figures showed growth held steady at 6.9 percent in the most recent quarter despite tighter lending controls aimed at taming surging debt levels.

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Momentum in China's service industries also slowed, according to the official non-manufacturing PMI, which dipped to 54.5 last month from 54.9 previously.

Taken together, "today's data also hint at a slowdown in the broader economy," said Julian Evans-Pritchard of Capital Economics. "We anticipate further weakness ahead as the crackdown on financial risks weighs on credit expansion and economic growth."