Saturday, July 21, 2012
China Manufacturing Contracts: "External Headwinds Remaining Strong"
The HSBC China Flash Manufacturing Purchasing Managers' Index, compiled by Markit, decreased -0.3 to 48.1 in June, a 7-month low. This is the 8th 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 11 of the past 12 months. The flash 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 to be reported at the beginning of the month.
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 downwards. The PMI is a percentage - not a total.
Hongbin Qu, Chief Economist, China & CoHead of Asian Economic Research at HSBC, said: "China’s manufacturing sector continued to slow in June, though the pace of slowdown seems to be slowing. With external headwinds remaining strong, exports are likely to decelerate in the coming months. The sharp fall of prices and moderation of new orders suggest weak domestic demand, posing destocking pressures for Chinese manufacturers. All will likely weigh on the jobs market. As such, we expect more decisive policy stimulus to reverse the growth slowdown."
$FXI $GXC $PEK $EEM $EWH