* July exports +2.6 pcy y/y vs +5.0 pct in Reuters poll * July HSBC/Markit manufacturing PMI hits 10-month low * China slowdown key risk to firmer South Korea recovery By Se Young Lee SEOUL, Aug 1 (Reuters) - South Korean exports grew far less than expected in July and a measure of manufacturing activity slumped to the worst in nearly a year, data showed on Thursday, suggesting global demand has yet to turn to underwrite a firm recovery in Asia's fourth-largest economy. Overseas shipments by the world's seventh-largest exporter rose by 2.6 percent in July in annual terms, better than a 1.0 percent fall in June but far below the median forecast of 5.0 percent growth from a Reuters survey of economists. In another sign of the challenging international conditions, average exports value per working day -- a useful measure for monthly comparison in the absence of seasonally adjusted figures -- slipped to $1.83 billion in July, the weakest in 11 months and down from $2.17 billion in June. "Today's export figures show that weak global demand is still weighing on Korea's growth," said HSBC economist Ronald Man. "The smaller trade balance, too, means that the direct support from net exports may decrease, keeping GDP growth under pressure in the third quarter." The potential for an underwhelming third quarter GDP outcome was underscored by the latest manufacturing report. The HSBC/Markit purchasing managers' index of South Korea's manufacturing sector fell to a seasonally adjusted 47.2 percent in July, the lowest in 10 months and slipping further below the 50 mark separating growth from contraction as new export orders declined. Thursday's data indicates that the pace of recovery in South Korea's economy remained modest, underpinned by the government's stimulus measures, with a full-fledged rebound not yet firmly entrenched. July imports rose for the first time since January on a year-on-year basis but purchases of capital goods and raw materials from abroad fell, in another sign that manufacturing of export goods would remain weak for some time. South Korea's economic growth accelerated to a seasonally adjusted 1.1 percent in sequential terms during the second quarter, the fastest in more than two years, the central bank said last week. The Bank of Korea (BOK) also projects growth to accelerate further in the current July-September quarter, when the majority of the government's fiscal stimulus will be spent. But analysts warn of significant downside risks in the coming months amid signs of an emerging slowdown in China, South Korea's biggest exports market. A recent string of soft indicators from China has stoked worries about the country's ability to maintain its growth momentum. Analysts say that, while Beijing won't accept annual growth below 7 percent, a further slowdown in the world's second-largest economy will undercut South Korea's momentum. For now, however, the chill in China hasn't noticeably impacted on South Korea's exports. Regional data released by the trade ministry showed that shipments to China rose by 14.5 percent in annual terms last month, suggesting no sharp decline in demand from the country. China's official purchasing manager index reading for July was also better than expected. Separate data released earlier on Thursday showed that South Korea's July consumer price index rose by 1.4 percent from a year earlier, reaching a five-month high but still well below the BOK's target band of between 2.5 percent and 3.5 percent as domestic demand remained weak. Another set of private data released on Thursday showed that the country's home prices held steady in July from the previous month, suggesting that the slumping property market may be stabilising.