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China's manufacturing activities slow to 9-month low
By Wang Yanlin |
September 1, 2012, Saturday
|
Online Edition
Online Edition
CHINA'S manufacturing activities in mainly state-owned enterprises contracted for the first time in nine months in August, a survey by the China Federation of Logistics and Purchasing said this morning.
The official Purchasing Managers' Index, a comprehensive gauge of manufacturing activities weighted towards large state-owned companies, edged down from July's 50.1 to 49.2 in August, a nine-month low and the first time it fell below 50 since November 2011.
A reading below 50 means contraction.
Zhou Hao, an economist at Australia and New Zealand Banking Group, said the official PMI reading raised concerns that the policies implemented so far have failed to arrest a cyclical economic downturn.
"We think that the weak PMI figures, plus the sluggish July activity data, suggest that China's growth momentum continues to decelerate," Zhou said. "To a large extent, the interest rate cuts in June and July and the policy experimentation of using the reverse repos to inject short-term liquidity have failed to instill much confidence to the economy."
Zhou suggested the People's Bank of China will have to rely on cutting the reserve requirement ratio going forward, with a 50 basic points reserve ratio cut possible, and a 100 basic points cut not surprising.
Zhang Liqun, an analyst at the Development Research Center of the State Council, was more optimistic although he also acknowledged the sliding official PMI was disappointing.
"Judging from the market demand, China's efforts on stabilizing the growth will filter through in the months to come, and can bolster the index in the future," Zhang said.
The component indices showed that production slipped 0.9 point t from a month earlier to 50.9 in August, new orders fell 0.3 point to 48.7, and new export orders remained flat at 46.6.
The official Purchasing Managers' Index, a comprehensive gauge of manufacturing activities weighted towards large state-owned companies, edged down from July's 50.1 to 49.2 in August, a nine-month low and the first time it fell below 50 since November 2011.
A reading below 50 means contraction.
Zhou Hao, an economist at Australia and New Zealand Banking Group, said the official PMI reading raised concerns that the policies implemented so far have failed to arrest a cyclical economic downturn.
"We think that the weak PMI figures, plus the sluggish July activity data, suggest that China's growth momentum continues to decelerate," Zhou said. "To a large extent, the interest rate cuts in June and July and the policy experimentation of using the reverse repos to inject short-term liquidity have failed to instill much confidence to the economy."
Zhou suggested the People's Bank of China will have to rely on cutting the reserve requirement ratio going forward, with a 50 basic points reserve ratio cut possible, and a 100 basic points cut not surprising.
Zhang Liqun, an analyst at the Development Research Center of the State Council, was more optimistic although he also acknowledged the sliding official PMI was disappointing.
"Judging from the market demand, China's efforts on stabilizing the growth will filter through in the months to come, and can bolster the index in the future," Zhang said.
The component indices showed that production slipped 0.9 point t from a month earlier to 50.9 in August, new orders fell 0.3 point to 48.7, and new export orders remained flat at 46.6.
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