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Manufacturing weakens more than expected, hits 5-month low
By Wang Yanlin |
June 1, 2012, Friday
|
Online Edition
Online Edition
China's manufacturing activities weakened more than expected in May with a survey index measuring operational conditions in factories slipping to a five-month low.
The official Purchasing Managers Index, a comprehensive gauge of manufacturing activities weighted towards large state-owned enterprises, decreased to 50.4 last month from April's 53.3, the China Federation of Logistics and Purchasing said this morning.
A reading above 50 means expansion, while the opposite points to contraction.
The component indices indicated demand from both home and abroad scaled back with new orders slashing 4.7 points to 49.8, and new export orders dropping 1.8 points to 50.4.
The federation said furniture, machinery equipment, vehicle and non-ferrous metal companies reported notable drops in market demand.
"The official PMI presented a sharp decrease as feared, even below our expectation of 52," said Zhou Hao, an economist at Australia and New Zealand Banking Group Ltd. "It was a reflection of previous disappointing industrial production and power consumption data, and was very close to the reading of 50, which separates expansion from contraction."
Zhou said the data sounds an alarm for the possibility of a drop in industrial output this month and the next, and greatly raised the likelihood of an interest rate decrease in the near term.
Meanwhile, the HSBC China Manufacturing Purchasing Managers Index, which is slanted more towards private and export-oriented companies, was 48.4 in May, down from April's 49.3. It was the seventh straight month of worsening conditions in China's manufacturing sector.
"May's final reading confirmed that manufacturing growth slowed further on weakening demand from both overseas and domestic markets," said Qu Hongbin, chief economist for China at HSBC. "This points to a continuous slowdown of the real economy in the second quarter and should prompt China to step up easing efforts in the coming months."
Qu suggested policymakers allow fiscal measures and private investment to play a bigger role in supporting growth, complementing monetary easing via reserve requirement ratio cuts and possibly one interest rate reduction of 0.25 percent.
China's gross domestic product grew 8.1 percent from a year earlier in the first quarter, the slowest pace in nearly three years, stoking fears of a hard landing in the world's second largest economy.
Since last week, China has unveiled a set of measures to boost the sagging economy, at a time when some analysts forecast the growth may slip below 7.5 percent in the current quarter.
The measures included the subsidies for the purchase of energy-saving home appliances and cars using alternative energy, and the expansion of private investment into some state-dominated fields like railways, energy, telecommunications, education and health care.
The National Development and Reform Commission, the country's top economic planning agency, also accelerated approvals of new investment projects.
The official Purchasing Managers Index, a comprehensive gauge of manufacturing activities weighted towards large state-owned enterprises, decreased to 50.4 last month from April's 53.3, the China Federation of Logistics and Purchasing said this morning.
A reading above 50 means expansion, while the opposite points to contraction.
The component indices indicated demand from both home and abroad scaled back with new orders slashing 4.7 points to 49.8, and new export orders dropping 1.8 points to 50.4.
The federation said furniture, machinery equipment, vehicle and non-ferrous metal companies reported notable drops in market demand.
"The official PMI presented a sharp decrease as feared, even below our expectation of 52," said Zhou Hao, an economist at Australia and New Zealand Banking Group Ltd. "It was a reflection of previous disappointing industrial production and power consumption data, and was very close to the reading of 50, which separates expansion from contraction."
Zhou said the data sounds an alarm for the possibility of a drop in industrial output this month and the next, and greatly raised the likelihood of an interest rate decrease in the near term.
Meanwhile, the HSBC China Manufacturing Purchasing Managers Index, which is slanted more towards private and export-oriented companies, was 48.4 in May, down from April's 49.3. It was the seventh straight month of worsening conditions in China's manufacturing sector.
"May's final reading confirmed that manufacturing growth slowed further on weakening demand from both overseas and domestic markets," said Qu Hongbin, chief economist for China at HSBC. "This points to a continuous slowdown of the real economy in the second quarter and should prompt China to step up easing efforts in the coming months."
Qu suggested policymakers allow fiscal measures and private investment to play a bigger role in supporting growth, complementing monetary easing via reserve requirement ratio cuts and possibly one interest rate reduction of 0.25 percent.
China's gross domestic product grew 8.1 percent from a year earlier in the first quarter, the slowest pace in nearly three years, stoking fears of a hard landing in the world's second largest economy.
Since last week, China has unveiled a set of measures to boost the sagging economy, at a time when some analysts forecast the growth may slip below 7.5 percent in the current quarter.
The measures included the subsidies for the purchase of energy-saving home appliances and cars using alternative energy, and the expansion of private investment into some state-dominated fields like railways, energy, telecommunications, education and health care.
The National Development and Reform Commission, the country's top economic planning agency, also accelerated approvals of new investment projects.
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