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01 Aug 2013

Chinese manufacturing cools

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China’s manufacturing sector slowed in July, according to the HSBC China Manufacturing Purchasing Managers’ Index™. The headline figure fell to an 11-month low of 47.7, down from 48.2 in June. The index is unchanged from the Flash PMI™ published on 24 July.

Manufacturers reported that demand fell both at home and abroad. Staff numbers dropped for the fourth successive month, with the rate of job cutting the fastest since March 2009. Total new orders fell at the sharpest rate for 11 months, while exporters reported lower new sales to Europe, South-East Asia and the United States, compared to levels in June.

With weak demand from both domestic and external markets, the cooling manufacturing sector continued to weigh on employment

Qu Hongbin,
Chief Economist for Greater China, HSBC

Qu Hongbin, Chief Economist for Greater China and Co-Head of Asian Economic Research, said: “With weak demand from both domestic and external markets, the cooling manufacturing sector continued to weigh on employment. Yet this, plus the recent weaker data, has prompted Beijing to introduce more fine-tuning measures, from tax breaks for small companies to increased spending on public housing, railway, energy saving and IT infrastructure areas. These targeted measures should boost confidence and reduce downside risks to growth.”

Average input costs fell at the slowest pace in four months, but still at a marked pace overall as imported goods were reported to be lower in price. Reduced operating costs were passed on to clients after a fall in output charges. The PMI™, based on data from more than 420 manufacturers, has been below 50 since May. A figure below 50 suggests contraction, while above 50 suggests expansion.

In June, HSBC Global Research cut its GDP growth forecast for China from 8.2 per cent to 7.4 per cent for 2013 and from 8.4 per cent to 7.4 per cent for 2014.

The latest HSBC Emerging Markets Index, which covers 16 countries and was published on 5 July, dropped to 50.6 in June, signalling the weakest growth for four years, though still positive.

The August Flash China PMI™ is due for release on 22 August 2013.

The intellectual property rights to the HSBC China Manufacturing PMI™ provided herein is owned by Markit Economics Limited. Any unauthorised use, including but not limited to copying, distributing, transmitting or otherwise of any data appearing is not permitted without Markit’s prior consent. Markit shall not have any liability, duty or obligation for or relating to the content or information (“data”) contained herein, any errors, inaccuracies, omissions or delays in the data, or for any actions taken in reliance thereon. In no event shall Markit be liable for any special, incidental, or consequential damages, arising out of the use of the data. Purchasing Managers' Index™ and PMI™ are trade marks of Markit Economics Limited, HSBC use the above marks under license. Markit and the Markit logo are registered trade marks of Markit Group Limited.

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