China factories in eighth month of contraction: PMI

Thu Jun 21, 2012 5:03am EDT
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By Lucy Hornby

BEIJING (Reuters) - China's factory sector shrank for an eighth straight month in June as export orders sentiment hit its weakest level since early 2009, according to a survey that indicates the country's economic trough may extend well into the third quarter.

The HSBC Flash Purchasing Managers Index, the earliest monthly indicator of China's industrial activity, fell to a seven-month low of 48.1 in June from a final reading of 48.4 in May.

It marked the eighth consecutive month that the HSBC PMI has been below 50, indicating contraction and matching a similar streak during the much deeper slowdown during the global financial crisis of 2008/2009.

Asian stocks fell and commodities slipped broadly.

After a sluggish economic performance in April and May, the HSBC figures suggest June fared little better, dashing hopes that activity would show signs of picking up in the second quarter.

Rather than a V-shaped recovery, China's economy may be facing more of a longer-term trough before it picks up, or a U-shaped recovery, analysts say.

"Economic activity going into June is still quite soft in general," said Kevin Lai, an analyst at Daiwa in Hong Kong.

Economic growth is widely expected to have slid for the sixth straight quarter in April through June, as the country feels the impact of the euro area debt crisis and as property controls weigh on domestic demand.   Continued...

Steel workers stand next to a furnace at the Huaxi Iron and Steel Company plant in Huaxi village, in Jiangsu province October 7, 2011. REUTERS/Carlos Barria