China's manufacturing sector painted a mixed picture in July, with the official activity gauge unexpectedly slipping into contraction territory while an unofficial survey pointed to an expansion for the first time in 17 months.
The government's manufacturing Purchasing Managers' Index (PMI), a survey that tracks the health of large and state-owned companies, came in at 49.9 in July, versus the 50.0 logged in June.
The July official PMI was slightly under forecasts; a poll of analysts by Reuters had predicted a 50.0 reading.
From March to May, the survey logged results above the key 50 level that separates expansion from contraction. In the seven months before March, the survey had remained stuck below 50.
Separately, Caixin's China July manufacturing PMI, which tracks smaller-scale private firms compared to the official gauge, rose above the key 50 level for the first time since February 2015. The index reported a 50.6 reading for July, compared with 48.6 in June.
The divergence between the two PMI readings reflected flooding in parts of China that affected near-term domestic production of large enterprises, while an upturn in the tech cycle helped export-oriented private sector enterprises, JP Morgan economists wrote in a note.
China's economy, the world's second-largest, has shown signs of stabilizing after a torrid summer last year that saw a hefty devaluation in the yuan and an acceleration of capital outflows.
"Driving the headline index higher in July was a renewed rise in total new business. Though moderate, it was the first time that overall new orders had increased since March," Caixin said in its PMI report.
The data however indicated that growth in new business was largely due to stronger domestic demand as export sales declined marginally at the start of the third quarter, the report added.