China HSBC PMI hits seven-month low of 48.2 in June

Sun Jul 1, 2012 10:35pm EDT
 
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BEIJING (Reuters) - China's factory activity shrank in June at the fastest pace in seven months as new export orders tumbled to depths last seen in March 2009, a private sector survey showed, underlining the risk of a lurch lower for the Chinese economy.

The HSBC Purchasing Managers' Index (PMI) fell to 48.2 after seasonal adjustments, its lowest since November 2011, and little changed from a flash, or preliminary, estimate of 48.1. The final reading in May was 48.4.

June was the eighth straight month of a reading below 50, the threshold dividing expansion from contraction in the survey methodology.

China's official PMI, released on Sunday, also fell to a seven-month low in June. However, the official PMI was 50.2, indicating the sector was still expanding.

The two indexes often give divergent readings as the official PMI surveys mainly big, state-backed firms, while the HSBC PMI takes the pulse of more smaller, private-sector companies.

But both readings underline speculation that Beijing will relax monetary and fiscal policies further to boost domestic activity to compensate for weakening foreign demand for China's factory goods - a problem for the world's biggest exporter.

The survey said export demand from Europe and North America was especially weak.

"We expect more decisive easing efforts to come through in coming months," said Qu Hongbin, an economist at HSBC.

"It is all about growth and employment," Qu said. "As external demand has weakened and domestic demand hasn't shown a meaningful improvement in response to earlier easing measures, growth is likely to be on track for further slowdown."   Continued...

 
Uighur ethnic minority employees work at the production line of a textile mill in Aksu, Xinjiang Uyghur Autonomous Region March 31, 2012. REUTERS/Stringer