HSBC and official PMIs post drop in factory activity
Print Edition
MANUFACTURING activity in China’s private and export-oriented companies contracted for the second straight month in January, a survey showed yesterday.
The HSBC Purchasing Managers’ Index, an indicator of operating conditions in the industrial sector weighing toward private and export-oriented firms, was 49.7 last month. It was up from 49.6 in December but lower than the previous flash reading of 49.8, according to HSBC and research firm Markit.
A reading below 50 means decline, and it pointed at a second contraction after the index fell below 50 in December for the first time since May of last year.
Meanwhile, the official PMI, compiled by the National Bureau of Statistics and the China Federation of Logistics and Purchasing, fell to a 28-month low of 49.8 in January, down from 50.1 in December. The reading suggested state-owned manufacturers suffer from a contraction in activity as well.
Qu Hongbin, chief economist for China at HSBC, said that although private and export-oriented firms saw growth in new orders, they saw downward revisions from the previous flash reading.
“We think demand in the manufacturing sector remains weak and more aggressive monetary and fiscal easing measures will be needed to prevent another sharp slowdown in growth,” Qu said.
January was a traditionally weak season for industrial activity due to the New Year holiday and the upcoming Chinese New Year. But this year, seasonal factors could be seen as favorable because the Chinese New Year falls in February this year, while it was in late January last year, which created a front-loading effect.
Components of the HSBC PMI showed production rose slightly for the first time in three months, and new orders stabilized.
China’s gross domestic product expanded 7.4 percent from a year earlier in 2014, the slowest in 24 years led by correction in the real estate industry.
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