China official PMIs for July;

50.0 for the Manufacturing Purchasing Managers Index (PMI)

  • expected 50.1, prior was 50.2

And 53.9 for the Non-Manufacturing Purchasing Managers Index (PMI)

  • prior was 53.8

Commenting on the data, Zhao Qinghe, senior statistician at the National Bureau of Statistics, "cited the impact from hot weather, storms and commodity prices as major reasons for the drop" (via Bloomberg)

  • Gauges for different sectors show that the PMI for big companies was 50.6
  • For medium-sized firms 50
  • Smaller frims 46.9
  • The small companies' index remains in contraction, and "that indicates smaller enterprises face more difficulties when running their businesses," Zhao said.

From Zhu Haibin, Chief China Economist at JPMorgan Chase & Co. in Hong Kong:

  • "This shows that the pickup we saw in the second quarter is not stable; we have seen no sign of recovery in the manufacturing sector
  • We may see manufacturing bottom in the third quarter as the government continues and steps up measures to stabilize growth."
  • The divergence between bigger and smaller companies suggests monetary easing, especially interest-rate cuts, help large companies
  • Local government projects tend to give an additional boost to big manufacturers while small companies suffer more from tepid exports

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We'll get the non-official manufacturing PMI (from Caixin-Markit ... this is the former HSBC China PMI) on Monday. The flash reading was out last week, coming at 48.2 (vs. 49.7 expected and 49.4 in June).

The official PMI and Caixin PMI are different surveys, of different firms, with different characteristics, so they often have diverging results. Both are moving in the same direction for July, though.

The softer readings will be a negative input for the AUD.