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China's manufacturing index reveals gloomy reality
By Wang Yanlin |
August 1, 2012, Wednesday
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Online Edition
Online Edition
AN official index today shows that China's manufacturing activities grew at the slowest pace in eight months in July under weakening export orders, reinforcing the necessity of more supportive policies.
But the sector still expanded, inviting some economists to regard it as a sign of stabilizing economy.
Another similar reading released by HSBC today also indicates the condition continues to worsen, though not as fast as before.
The official Purchasing Managers' Index, a comprehensive gauge of manufacturing activities weighted towards large state-owned enterprises, decreased to 50.1 last month from June's 50.2, the China Federation of Logistics and Purchasing said this morning.
A reading above 50 means expansion, and the latest figure indicated China's manufacturing sector was closer to the brink of contraction.
The component indices showed demand from abroad scaled back as new export orders lost 0.9 point to 46.6, and new orders retreated 0.2 point to 49.
Zhou Hao, an economist at Australia and New Zealand Banking Group Co Ltd, said the official PMI reading suggested that China's manufacturing sector was expanding, albeit at a moderate pace.
"We maintain our view that China's economy will continue to pick up gradually in the third quarter, supported by further monetary policy easing and a faster implementation of fiscal policy," Zhou said in a quick note.
He estimated the People's Bank of China will soon cut reserve requirement ratio again to further replenish the liquidity in the banking system.
Meanwhile, the HSBC China Manufacturing Purchasing Managers' Index, which is slanted more towards private and export-oriented companies, registered 49.3 in July, up from 48.2 a month earlier but still signaling contraction in the sector.
The difference between the official PMI and its counterpart compiled by HSBC and markit is caused by different samples in different segment of the industry.
The HSBC PMI data indicated China's manufacturing sector operating conditions were deteriorating at a lower pace, said Qu Hongbin, chief economist for China at HSBC.
"It is gained thanks to the initial effect of the earlier easing measures," Qu said. "But this is far from inspiring, as China's growth slowdown has not been reversed meaningfully and downside pressure persists with external markets continuing to deteriorate."
Qu also expected China to step up policy easing in the coming months to support growth and employment.
China's gross domestic product expanded 7.6 percent from a year earlier in the second quarter, a three-year low and the first time it fell below 8 percent in more than two years.
But the sector still expanded, inviting some economists to regard it as a sign of stabilizing economy.
Another similar reading released by HSBC today also indicates the condition continues to worsen, though not as fast as before.
The official Purchasing Managers' Index, a comprehensive gauge of manufacturing activities weighted towards large state-owned enterprises, decreased to 50.1 last month from June's 50.2, the China Federation of Logistics and Purchasing said this morning.
A reading above 50 means expansion, and the latest figure indicated China's manufacturing sector was closer to the brink of contraction.
The component indices showed demand from abroad scaled back as new export orders lost 0.9 point to 46.6, and new orders retreated 0.2 point to 49.
Zhou Hao, an economist at Australia and New Zealand Banking Group Co Ltd, said the official PMI reading suggested that China's manufacturing sector was expanding, albeit at a moderate pace.
"We maintain our view that China's economy will continue to pick up gradually in the third quarter, supported by further monetary policy easing and a faster implementation of fiscal policy," Zhou said in a quick note.
He estimated the People's Bank of China will soon cut reserve requirement ratio again to further replenish the liquidity in the banking system.
Meanwhile, the HSBC China Manufacturing Purchasing Managers' Index, which is slanted more towards private and export-oriented companies, registered 49.3 in July, up from 48.2 a month earlier but still signaling contraction in the sector.
The difference between the official PMI and its counterpart compiled by HSBC and markit is caused by different samples in different segment of the industry.
The HSBC PMI data indicated China's manufacturing sector operating conditions were deteriorating at a lower pace, said Qu Hongbin, chief economist for China at HSBC.
"It is gained thanks to the initial effect of the earlier easing measures," Qu said. "But this is far from inspiring, as China's growth slowdown has not been reversed meaningfully and downside pressure persists with external markets continuing to deteriorate."
Qu also expected China to step up policy easing in the coming months to support growth and employment.
China's gross domestic product expanded 7.6 percent from a year earlier in the second quarter, a three-year low and the first time it fell below 8 percent in more than two years.
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