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Falling flash PMI raises slowdown fears
By Emily Ford |
March 22, 2012, Thursday
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Online Edition
Online Edition
ACTIVITY in China's manufacturing sector fell to a four-month low in March, stoking fears that economic growth may be slowing more than expected, preliminary figures from the HSBC Purchasing Managers Index suggest.
The amount of new orders received by factories fell to a reading of 48.1 in March, down from 49.6 in February and the fifth month in a row that manufacturing activity has contracted, according to the flash reading of the monthly survey, produced by HSBC and UK research firm Markit.
A figure above 50 signals expansion, while anything below this level indicates contraction.
HSBC said that the data showed a slackening in domestic demand in China and that it called for "further easing steps" from authorities in Beijing to relax monetary policy and support growth.
Employment in the country's manufacturing sector is also at its lowest since March 2009, suggesting that companies were holding back from hiring staff because of a slowdown in production, HSBC said.
"Weakening domestic demand continued to weigh on growth, as indicated by a slowdown in new orders, which came in at a four-month low," Qu Hongbin, the bank's chief economist for China, said in a statement.
"Growth momentum could slow down further amid a combination of sluggish export new orders and softening domestic demand. This calls for further easing steps from the Beijing authority."
Export orders continued to fall in March but at a slower rate than previously, the survey suggested. Earlier this month China reported a US$31.5 billion trade deficit for February, its biggest monthly deficit for almost ten years, due to subdued exports from Europe and the US.
Alistair Thornton, a China economist with IHS Global Insight in Beijing, warned that PMI data could be volatile, but said that the reading definitely showed a "downward momentum."
"Activity is slowing, but it's stabilizing. I don't expect to see a sharp bounceback this year," he explained.
"It does build the case for further monetary policy easing, but it won't come as quick as the markets had hoped for."
The full reading from HSBC's PMI survey will be published on April 1, the same day as China's official manufacturing data is scheduled to be released.
The amount of new orders received by factories fell to a reading of 48.1 in March, down from 49.6 in February and the fifth month in a row that manufacturing activity has contracted, according to the flash reading of the monthly survey, produced by HSBC and UK research firm Markit.
A figure above 50 signals expansion, while anything below this level indicates contraction.
HSBC said that the data showed a slackening in domestic demand in China and that it called for "further easing steps" from authorities in Beijing to relax monetary policy and support growth.
Employment in the country's manufacturing sector is also at its lowest since March 2009, suggesting that companies were holding back from hiring staff because of a slowdown in production, HSBC said.
"Weakening domestic demand continued to weigh on growth, as indicated by a slowdown in new orders, which came in at a four-month low," Qu Hongbin, the bank's chief economist for China, said in a statement.
"Growth momentum could slow down further amid a combination of sluggish export new orders and softening domestic demand. This calls for further easing steps from the Beijing authority."
Export orders continued to fall in March but at a slower rate than previously, the survey suggested. Earlier this month China reported a US$31.5 billion trade deficit for February, its biggest monthly deficit for almost ten years, due to subdued exports from Europe and the US.
Alistair Thornton, a China economist with IHS Global Insight in Beijing, warned that PMI data could be volatile, but said that the reading definitely showed a "downward momentum."
"Activity is slowing, but it's stabilizing. I don't expect to see a sharp bounceback this year," he explained.
"It does build the case for further monetary policy easing, but it won't come as quick as the markets had hoped for."
The full reading from HSBC's PMI survey will be published on April 1, the same day as China's official manufacturing data is scheduled to be released.
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