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China's industrial activity may drop to 7-month low, HSBC says
By Wang Yanlin |
June 21, 2012, Thursday
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Online Edition
Online Edition
China's manufacturing activities at privately owned companies are likely to deteriorate again in June, with a preliminary reading for the HSBC Purchasing Managers Index dropping to a seven-month low.
June's HSBC Flash PMI, the earliest available indicator of China's industrial sector that is slanted more towards private and export-oriented firms, decreased to 48.1 from May's 48.4, the bank said this morning.
A reading under 50 means contraction.
If confirmed by the final index, it would be the eighth month for private manufacturers to report shrinking activities - the longest run of readings below 50 since the global financial crisis.
Qu Hongbin, chief economist for China at HSBC, said despite the contraction, the pace of the slowdown seems to be moderating. But he remained bearish due to external uncertainties.
"With external headwinds continuing to be strong, exports are likely to decelerate in the coming months," Qu said. "The sharp fall of prices and moderation of new orders suggest weak domestic demand, posing destocking pressures for Chinese manufacturers."
Qu said this will likely weigh on the job market, and he expects more decisive policy stimulus to reverse the growth slowdown.
To support growth, China has rolled out a set of stimulus measures, including subsidies for energy-efficient consumption, expansion of private investment in previously state-dominant sectors, faster approval of new investment projects and the acceleration of tax reform.
Apart from the fiscal measures, the central bank also cut interest rates earlier this month, the first since December 2008.
Lian Ping, chief economist at Bank of Communications, said: "The government is sending a signal through these moves to boost confidence."
He said he still expects gross domestic product growth at between 8 and 8.5 percent this year.
The country's economic performance stabilized last month following April's sharp deterioration. Industrial production expanded 9.6 percent from a year earlier, up 0.3 percentage point from April's figure.
The official Purchasing Managers Index, which is weighted towards large state-owned enterprises, decreased to 50.4 in May - the first drop this year. Its figure for June will be announced on July 1.
June's HSBC Flash PMI, the earliest available indicator of China's industrial sector that is slanted more towards private and export-oriented firms, decreased to 48.1 from May's 48.4, the bank said this morning.
A reading under 50 means contraction.
If confirmed by the final index, it would be the eighth month for private manufacturers to report shrinking activities - the longest run of readings below 50 since the global financial crisis.
Qu Hongbin, chief economist for China at HSBC, said despite the contraction, the pace of the slowdown seems to be moderating. But he remained bearish due to external uncertainties.
"With external headwinds continuing to be strong, exports are likely to decelerate in the coming months," Qu said. "The sharp fall of prices and moderation of new orders suggest weak domestic demand, posing destocking pressures for Chinese manufacturers."
Qu said this will likely weigh on the job market, and he expects more decisive policy stimulus to reverse the growth slowdown.
To support growth, China has rolled out a set of stimulus measures, including subsidies for energy-efficient consumption, expansion of private investment in previously state-dominant sectors, faster approval of new investment projects and the acceleration of tax reform.
Apart from the fiscal measures, the central bank also cut interest rates earlier this month, the first since December 2008.
Lian Ping, chief economist at Bank of Communications, said: "The government is sending a signal through these moves to boost confidence."
He said he still expects gross domestic product growth at between 8 and 8.5 percent this year.
The country's economic performance stabilized last month following April's sharp deterioration. Industrial production expanded 9.6 percent from a year earlier, up 0.3 percentage point from April's figure.
The official Purchasing Managers Index, which is weighted towards large state-owned enterprises, decreased to 50.4 in May - the first drop this year. Its figure for June will be announced on July 1.
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