The first official gauge of China’s economy in the second half of the year showed continued upward momentum in the recovery.

The official manufacturing purchasing managers index in July rose to 51.1 from 50.9 a month earlier, according to data released by the National Bureau of Statistics on Friday.

The non-manufacturing gauge dropped slightly to 54.2, while the construction indicator rose back above 60. Readings above 50 indicate improving conditions from the previous month.

The rebound in economic growth is continuing into the second half of the year as government-led investment gains traction and global demand recovers.

Economists have revised up their forecasts for full-year growth, and now see China’s economy expanding 2 per cent this year. Construction activities continued to improve due to the speeding up of infrastructure projects, according to the NBS, with the construction employment indicator rising to 56.2. However, job and income losses will weigh on the recovery by limiting peoples ability to spend.

Further smaller virus outbreaks will also damage confidence and spending, especially on catering, accommodation and tourism. The supply side is still on track towards further improvement, but the employment index remains weak in both manufacturing and services PMIs — so demand will still take some time to recover, said Zhou Hao, senior emerging markets economist at Commerzbank AG in Singapore.

The virus resurgence will certainly cloud the recovery process in the household demand. Heavy flooding in central and southern China and viral outbreaks have caused some disruptions but are not expected to derail the economic recovery, according to a report from Bloomberg Economics before the data was released.

A sub-index of new export orders for factories climbed to 48.4, while new orders were also higher at 51.7. A sub-index of manufacturing employment rose to 49.3, while non-manufacturing employment slowed to 48.1. Separate PMI data on Chinas high-tech sector and small businesses showed the economy has improved in the month, while a Bloomberg Economics gauge of early indicators suggested a slight deceleration.

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