By Joe Cash

BEIJING China's factory activity likely contracted for a third straight month in June, albeit at a marginally slower pace, a Reuters poll showed on Thursday, underscoring the need for further policy stimulus to counter weak demand at home and abroad.

The official purchasing managers' index (PMI) is expected to have edged up to 49.0 in June from 48.8 in May, according to the median forecast of 27 economists in a Reuters poll.

An index reading above 50 indicates expansion activity on a monthly basis and a reading below indicates contraction.

While economic growth beat expectations in the first quarter, analysts are now downgrading their forecasts for the rest of the year, following May industrial output and retail sales data missing forecasts and indicating that policymakers will need to do more to shore up a shaky post-pandemic recovery.

Nomura has been the most bearish, cutting its forecast for growth in China's gross domestic product (GDP) this year to 5.1% from 5.5%, adding in a note that its new forecast took account of anticipated stimulus measures.

The government has set a modest GDP growth target of about 5% for this year after badly missing its 2022 goal.

China's cabinet on Friday pledged to "take more effective measures to enhance the momentum of development, optimise the economic structure, and promote the sustained recovery of the economy", and to do so "in a timely manner".

Addressing a World Economic Forum summit in Tianjin on Tuesday, China's Premier Li Qiang reiterated that China will take steps to boost demand, but stopped short of unveiling before delegates any concrete policies.

The highest reading in the poll was 49.7, still short of breaking into expansion territory, while the lowest reading was 48.0.

The official manufacturing PMI, which largely focuses on big and state-owned firms, and its survey for the services sector, will be released on Friday.

(Reporting by Joe Cash; Polling by Madhumita Gokhale and Anant Chandak in Bengaluru; Editing by Simon Cameron-Moore)