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Manufacturing loses steam as PMI hits 10-month low
By Wang Yanlin |
May 23, 2011, Monday
|
Online Edition
Online Edition
CHINA'S manufacturing activities may slow down for a second month in May to the brink of contraction, according to the HSBC Purchasing Managers Index released today.
The HSBC Flash China Manufacturing PMI stood at 51.1 in May, a 10-month low and down from April's 51.8.
The flash data are published about one week before the final PMI data are released. The estimate is based on more than 85 percent of total PMI survey responses and aims to provide an accurate forecast of the final PMI.
A reading above 50 points to expansion and a reading below 50 means contraction.
"Manufacturers continued to reduce inventories amid sluggish business flows, causing production growth to hit a 10-month low," said Qu Hongbin, chief economist for China at HSBC. "But we think there is no need to worry about a hard landing because the current level of PMI is still consistent with the 13 percent industrial production growth and 9 percent GDP growth."
Qu said the policy focus should tilt towards taming inflation, and he expected China's tightening policy will continue in the coming months.
China's GDP expanded 9.7 percent in the first quarter from a year earlier. Its Consumer Price Index, the main gauge of inflation, rose 5.3 percent in April, close to a 32-month high of 5.4 percent in March.
To rein in inflation, China has lifted the interest rates twice this year and raised the required loan-to-deposit ratio five times.
Industrial production gained 13.4 percent year-on-year in April, 1.4 percentage points lower than the pace in March.
The HSBC Flash China Manufacturing PMI stood at 51.1 in May, a 10-month low and down from April's 51.8.
The flash data are published about one week before the final PMI data are released. The estimate is based on more than 85 percent of total PMI survey responses and aims to provide an accurate forecast of the final PMI.
A reading above 50 points to expansion and a reading below 50 means contraction.
"Manufacturers continued to reduce inventories amid sluggish business flows, causing production growth to hit a 10-month low," said Qu Hongbin, chief economist for China at HSBC. "But we think there is no need to worry about a hard landing because the current level of PMI is still consistent with the 13 percent industrial production growth and 9 percent GDP growth."
Qu said the policy focus should tilt towards taming inflation, and he expected China's tightening policy will continue in the coming months.
China's GDP expanded 9.7 percent in the first quarter from a year earlier. Its Consumer Price Index, the main gauge of inflation, rose 5.3 percent in April, close to a 32-month high of 5.4 percent in March.
To rein in inflation, China has lifted the interest rates twice this year and raised the required loan-to-deposit ratio five times.
Industrial production gained 13.4 percent year-on-year in April, 1.4 percentage points lower than the pace in March.
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