China hit by 7-month low PMI

A measly 50.2 PMI in June2012 has recorded PMI dip for two consecutive months.

In a release by Maybank Kim Eng, China's official Jun12 PMI was 50.2, marginally lower than the 50.4 in May12, but still better than the consensus figure of 49.8. Market expected Jun12 PMI to fall below 50, but the actual figures stayed above 50.

Here's more from Maybank Kim Eng:

The latest PMI was a 7-month low. Official PMI fell MoM for two consecutive months, but stayed above 50 for 7 consecutive months already. This indicates that manufacturing activities are still expanding, albeit at a very slow pace.

Also, there seemed to be some seasonality in the PMI numbers: Since 2006, PMI in June were mostly below than that in May (the only exception is 2009). Looking at the sub-indices, new export order sub-index fell to 47.5 (May12: 50.4), the lowest since Jan12. Exports are likely to remain weak for a while.

It is almost certain that the China 2Q12 headline GDP growth will be lower than that in 1Q12. We however believe that the latest PMI figures still point towards a slow-down in economy, not a hard-landing. It is quite likely that the
headline GDP growth will rebound in 3Q12.