Activities set to weaken further but China to avoid hard landing
By Wang Yanlin |
July 3, 2012, Tuesday
|
Print Edition
Print Edition
CHINA'S private and export-oriented manufacturers reported their activities shrank in June for eight straight months, an HSBC survey showed yesterday.
The HSBC Purchasing Managers' Index, a composite indicator of operating conditions in China's industrial sector, was at 48.2 last month from May's 48.4. The index is slanted toward private and export-focused companies.
A reading under 50 means contraction while the opposite points to expansion.
The June's index was at a level "indicative of a modest pace of deterioration in business conditions," HSBC said.
For the second quarter of this year, the index averaged its lowest quarterly value in over three years.
The index's reading contrasted with that of big state-owned enterprises whose business grew although at the slowest pace in seven months.
Qu Hongbin, HSBC's chief economist for China, said: "As external demand has weakened and domestic demand has not shown a meaningful improvement in response to earlier easing measures, growth is likely to slow further, weighing on the job market."
But he is confident that as inflation eases "China has plenty of room and policy ammunition to avoid a hard landing."
The component indices in the HSBC PMI cited weak demand for the fall.
The official Purchasing Managers' Index, compiled by the China Federation of Logistics and Purchasing and slanted toward big SOEs, continued to indicate growth. The official PMI was 50.2 in June, compared with May's 50.4, the federation said on Sunday.
But Yao Wei, an economist at Societe Generale, pointed out that: "Nine out of 11 component indices, including new orders, production and employment, indicated contraction, and it was just a slower pace of de-stocking that prevented the overall reading from contracting."
She urged the central bank further ease monetary policy and predicted either a cut in reserve requirement ratio or interest rate is probable this month.
The HSBC Purchasing Managers' Index, a composite indicator of operating conditions in China's industrial sector, was at 48.2 last month from May's 48.4. The index is slanted toward private and export-focused companies.
A reading under 50 means contraction while the opposite points to expansion.
The June's index was at a level "indicative of a modest pace of deterioration in business conditions," HSBC said.
For the second quarter of this year, the index averaged its lowest quarterly value in over three years.
The index's reading contrasted with that of big state-owned enterprises whose business grew although at the slowest pace in seven months.
Qu Hongbin, HSBC's chief economist for China, said: "As external demand has weakened and domestic demand has not shown a meaningful improvement in response to earlier easing measures, growth is likely to slow further, weighing on the job market."
But he is confident that as inflation eases "China has plenty of room and policy ammunition to avoid a hard landing."
The component indices in the HSBC PMI cited weak demand for the fall.
The official Purchasing Managers' Index, compiled by the China Federation of Logistics and Purchasing and slanted toward big SOEs, continued to indicate growth. The official PMI was 50.2 in June, compared with May's 50.4, the federation said on Sunday.
But Yao Wei, an economist at Societe Generale, pointed out that: "Nine out of 11 component indices, including new orders, production and employment, indicated contraction, and it was just a slower pace of de-stocking that prevented the overall reading from contracting."
She urged the central bank further ease monetary policy and predicted either a cut in reserve requirement ratio or interest rate is probable this month.
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