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Official China July PMI falls

(Reuters)
Updated: 2006-08-01 15:27

China's official purchasing managers' index (PMI) fell to 52.4 in July from 54.1 in June, the China Federation of Logistics and Purchasing said on Tuesday.

A reading in the index over 50 indicates an expansion of activity while one below 50 suggests contraction.

But the association, which compiles the index on behalf of the National Bureau of Statistics, said companies were starting to feel the pinch of higher prices for natural resources.

Businesses were also influenced by government efforts to cool an economy that grew in the second quarter at the fastest pace since 1995.

The drop was led by weakness in output, new orders and backlogs of work, the association said.

"The change in the July PMI reflects the start of a shift in expectations by firms towards the economic environment, including higher resource prices. They're also anticipating the results of recent macro control measures," the association quoted government economist Zhang Liqun as saying.

But Zhang said the overall impact on the economy would be limited because of the targeted nature of the austerity measures.

"After a certain period of time, I expect business expectations will adjust and the PMI index will continue to come in at a fairly high level," he said.