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China’s June flash PMI remains in contraction
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China's manufacturing activity may continue to improve in June but will remain contracted, a survey showed today.
The HSBC Flash China Manufacturing Purchasing Managers' Index, the earliest available indicator of China's industrial sector, landed at 49.6 this month, up from the final reading of 49.2 in May and 48.9 in April, according to HSBC and research firm Markit.
It was below the demarcation line of 50, which separates expansion from contraction, for the fourth straight month after a brief rebound in February.
Annabel Fiddes, an economist at Markit, said June's reading provided a mixed bag of data.
"On the one hand, the sector shows signs of improvement as production stabilized amid a slight pick-up in total new work, while purchasing activity also rose slightly," Fiddes said. "On the other hand, manufacturers continued to cut their staff numbers, with the latest reduction the sharpest in more than six years."
Fiddes said this suggested that companies have lowered growth expectations because demand conditions both at home and abroad remain subdued.
"The data add to evidence that the sector has lost growth momentum in the second quarter as a whole, and indicates that China may step up the efforts to stimulate the growth and job creation in the second half of the year," Fiddes said.
China's activity data showed some improvement in May but still failed market expectation with industrial production and retail sales growing faster but investment weakened, according to the National Bureau of Statistics earlier, and some economists forecast China's growth rate may fall below 7 percent.
China has cut both interest rates and reserve requirement ratio in the past few months, along with other fiscal stimulus, to bolster a softening economy. In the first three months, China's gross domestic product rose 7 percent, making it the weakest quarterly expansion in six years.
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