China's July Factory Improves; USA's Q2 GDP Sees Worst Ever Plunge

On Friday, official data on manufacturing Purchasing Manager's Index (PMI) showed that China's factory activity expanded in July for the fifth month in a row. The PMI reading of 51.1 was higher than June's 50.9, and also the highest since March for the world's second-largest economy.

In a PMI reading, the 50-point mark separates growth from contraction on a monthly basis.

China appears to have recovered from the economic paralysis caused by strict lockdowns to curb the spread of the coronavirus pandemic. However, factory activity also showed that new export orders declined but at a slower pace than the previous month, indicating continued pressure on external demand. Companies shed more employees than they hired, although the pace here was moderated compared to the previous month. The country's production rose to a four-month high.

A recent Reuters poll has forecast China's GDP (gross domestic product) to expand 2.2 percent in 2020, up from 1.8 percent previously projected, due to improving data.

Meanwhile, the US Commerce Department's first reading on the GDP data for the April-June period, released on Thursday, showed that the American economy saw the biggest ever quarterly plunge in activity. Its GDP for the quarter plunged 32.9 percent on an annualized basis, it was the worst drop ever, with the closest previously coming in mid-1921.

Sharp contractions in personal consumption, exports, inventories, investment and spending by state and local governments in the world's largest economy, brought its GDP down.