Tuesday, July 31, 2012

China Manufacturing Contracts: "Demand still remaining weak"

The HSBC China Manufacturing Flash Purchasing Managers' Index, compiled by Markit, increased +1.3 to 49.5 in July, a 5-month high. A contraction was expected and ongoing slowdowns are projected. This is the 9th consecutive month below 50, which indicates contraction.

The reading is above the 32-month low of 47.7 in November 2011. An index reading above 50 indicates an overall increase in manufacturing. The China Manufacturing PMI has been just below 50 for 12 of the past 13 months.

China Manufacturing PMI Manufacturing began contracting, an Index reading of less than 50, in July 2011. The chart peak was 55.3 in November 2010. The short, intermediate, and long-term trends are now level. The PMI is a percentage - not a total.

Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC, said: "July's headline PMI picked up modestly to a five-month high of 49.5, suggesting that the earlier easing measures are starting to work. That said, the below-50 July reading implied demand still remaining weak and employment under increasing pressure. This calls for more easing efforts to support growth and jobs. We believe the fast falling inflation allows Beijing to do so and a more meaningful improvement of growth is expected in the coming months when these measures fully filter through".

The HSBC Flash China Manufacturing Purchasing Managers’ Index™ (PMI™) is published on a monthly basis approximately one week before final PMI data are released, making the HSBC PMI the earliest available indicator of manufacturing sector operating conditions in China. The estimate is typically based on approximately 85%–90% of total PMI survey responses each month and is designed to provide an accurate indication of the final PMI data.


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