Manufacturing shrinks for 1st time in 9 months
By Wang Yanlin |
September 2, 2012, Sunday
|
Print Edition
Print Edition
CHINA'S manufacturing activities in mainly state-owned enterprises contracted for the first time in nine months in August, indicating a faster decelerating economy, a survey showed yesterday.
The official Purchasing Managers' Index, a comprehensive gauge of manufacturing activities weighted toward large state-owned companies, edged down from July's 50.1 to 49.2 last month, a nine-month low and the first time it fell below 50 since November 2011, according to the China Federation of Logistics and Purchasing.
A reading below 50 indicates contraction.
The component indices showed that production slipped 0.9 point from a month earlier to 50.9 in August - the only sub-index above 50, while new orders fell 0.3 point to 48.7, and new export orders remained flat at 46.6.
Purchase quantity index increased 2 points to 48.8 and input prices upped 5.1 points to 46.1, the federation's data showed, reflecting improving demand but also higher prices.
Zhou Hao, an economist at Australia and New Zealand Banking Group Ltd (ANZ), said the official PMI reading raised concerns that the policies have failed to arrest a cyclical economic downturn.
"The weak PMI figures, plus the sluggish July activity data, suggest that China's growth momentum continues to decelerate," Zhou said. "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 would have to rely on cutting the reserve requirement ratio going forward, with a 50-basic-point reserve ratio cut possible, and a 100-basic-point 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.
China's gross domestic product expanded 7.6 percent from a year earlier in the second quarter, the slowest in three years and close to the government target of a minimum 7.5 percent growth for this year.
ANZ's Zhou estimated the third-quarter GDP could even weaker as the policy implementation window has passed, and thus revised down China's 2012 economic growth to 7.8 percent from 8.2 percent previously.
The official Purchasing Managers' Index, a comprehensive gauge of manufacturing activities weighted toward large state-owned companies, edged down from July's 50.1 to 49.2 last month, a nine-month low and the first time it fell below 50 since November 2011, according to the China Federation of Logistics and Purchasing.
A reading below 50 indicates contraction.
The component indices showed that production slipped 0.9 point from a month earlier to 50.9 in August - the only sub-index above 50, while new orders fell 0.3 point to 48.7, and new export orders remained flat at 46.6.
Purchase quantity index increased 2 points to 48.8 and input prices upped 5.1 points to 46.1, the federation's data showed, reflecting improving demand but also higher prices.
Zhou Hao, an economist at Australia and New Zealand Banking Group Ltd (ANZ), said the official PMI reading raised concerns that the policies have failed to arrest a cyclical economic downturn.
"The weak PMI figures, plus the sluggish July activity data, suggest that China's growth momentum continues to decelerate," Zhou said. "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 would have to rely on cutting the reserve requirement ratio going forward, with a 50-basic-point reserve ratio cut possible, and a 100-basic-point 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.
China's gross domestic product expanded 7.6 percent from a year earlier in the second quarter, the slowest in three years and close to the government target of a minimum 7.5 percent growth for this year.
ANZ's Zhou estimated the third-quarter GDP could even weaker as the policy implementation window has passed, and thus revised down China's 2012 economic growth to 7.8 percent from 8.2 percent previously.
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