Manufacturing growing, but slowly
By Wang Yanlin |
August 2, 2012, Thursday
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Print Edition
Print Edition
China's manufacturing activities grew at their slowest pace in eight months in July with weakening export orders and less production reinforcing the necessity of more supportive policies to spur growth.
But the sector still expanded, inviting some economists to regard it as a sign of stabilizing economy.
The official Purchasing Managers' Index, a comprehensive gauge of manufacturing activities weighted toward large state-owned enterprises, edged down to 50.1 last month from June's 50.2, the China Federation of Logistics and Purchasing said yesterday.
A reading below 50 would indicate contraction.
The component indices showed demand from abroad continued to scale back as new export orders lost 0.9 points to 46.6, the lowest level since December. New orders as a whole retreated 0.2 points to 49.
Production also fell 0.2 points to 51.8, the federation's figures showed.
"Soft industrial activities and deteriorating external demand will keep the authorities on an easing bias," said Chang Jian, an economist at Barclays. But he believed a recovery, most likely to be gradual and modest, was happening.
Zhou Hao, an economist at Australia and New Zealand Banking Group Co Ltd, also said the official PMI reading suggested China's manufacturing sector was still 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.
He estimated that the People's Bank of China would soon cut the reserve requirement ratio again to further replenish liquidity in the banking system.
Zhou's optimism found support in the HSBC China Manufacturing Purchasing Managers' Index, also released yesterday, which reached a three-month high.
Slanted more toward private and export-oriented companies, the HSBC PMI registered 49.3 in July, up from 48.2 a month earlier.
The difference between the official PMI and its counterpart compiled by HSBC and Markit is due to different samples in different segments of the industry.
The HSBC PMI data indicated China's manufacturing sector operating conditions were deteriorating at a slower pace, said Qu Hongbin, chief economist for China at HSBC.
"It's 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 persist 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 has fallen below 8 percent in more than two years.
On Tuesday, President Hu Jintao reaffirmed China's stance of maintaining stable growth as the top economic priority, pledging adherence to a proactive fiscal policy and a prudent monetary policy to weather current hardships.
There were encouraging signs of late. Profit at China's industrial companies fell 1.7 percent from a year earlier, lower than May's 5.3 percent drop.
Also, the Ministry of Industry and Information Technology said last week that there were signs from the industrial sector that the economy had started to stabilize after the government stepped up policy easing efforts.
But the sector still expanded, inviting some economists to regard it as a sign of stabilizing economy.
The official Purchasing Managers' Index, a comprehensive gauge of manufacturing activities weighted toward large state-owned enterprises, edged down to 50.1 last month from June's 50.2, the China Federation of Logistics and Purchasing said yesterday.
A reading below 50 would indicate contraction.
The component indices showed demand from abroad continued to scale back as new export orders lost 0.9 points to 46.6, the lowest level since December. New orders as a whole retreated 0.2 points to 49.
Production also fell 0.2 points to 51.8, the federation's figures showed.
"Soft industrial activities and deteriorating external demand will keep the authorities on an easing bias," said Chang Jian, an economist at Barclays. But he believed a recovery, most likely to be gradual and modest, was happening.
Zhou Hao, an economist at Australia and New Zealand Banking Group Co Ltd, also said the official PMI reading suggested China's manufacturing sector was still 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.
He estimated that the People's Bank of China would soon cut the reserve requirement ratio again to further replenish liquidity in the banking system.
Zhou's optimism found support in the HSBC China Manufacturing Purchasing Managers' Index, also released yesterday, which reached a three-month high.
Slanted more toward private and export-oriented companies, the HSBC PMI registered 49.3 in July, up from 48.2 a month earlier.
The difference between the official PMI and its counterpart compiled by HSBC and Markit is due to different samples in different segments of the industry.
The HSBC PMI data indicated China's manufacturing sector operating conditions were deteriorating at a slower pace, said Qu Hongbin, chief economist for China at HSBC.
"It's 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 persist 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 has fallen below 8 percent in more than two years.
On Tuesday, President Hu Jintao reaffirmed China's stance of maintaining stable growth as the top economic priority, pledging adherence to a proactive fiscal policy and a prudent monetary policy to weather current hardships.
There were encouraging signs of late. Profit at China's industrial companies fell 1.7 percent from a year earlier, lower than May's 5.3 percent drop.
Also, the Ministry of Industry and Information Technology said last week that there were signs from the industrial sector that the economy had started to stabilize after the government stepped up policy easing efforts.
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