China’s HSBC PMI shows slower manufacturing in August

Beijing, China (4E) – HSBC released on Monday its final China Manufacturing Purchasing Managers Index (PMI) for August — a measurement of the country’s manufacturing activity — showing a decline to 47.6. It is lower compared to 49.3 recorded in July and the lowest mark since March 2009.

An above 50.0 PMI reading indicates there is expansion in manufacturing activity while a PMI reading under 50.0 suggests a contraction.

China’s manufacturing sector has now seen its tenth consecutive month of contraction as shown by a PMI reading that is below the 50-point level.

Falling new orders and shipments are major factors in the continued slump in Chinese manufacturing. The data also revealed that the new orders subindex has hit a nine-month low, causing a drag to the overall PMI.

The new orders index showed a 46.1 reading while the new exports orders print fell to 45.5 for the month, the lowest since March 2009.

In a statement, HSBC chief economist for China Qu Hongbin said that the final manufacturing PMI for August simply confirmed the increasing downward pressures currently facing China’s manufacturing sector.

Qu added that Beijing needs to increase their efforts to ease monetary policy in order to maintain growth levels and enhance the labor market situation in the country.

Yao Wei, an economist from Societe Generale, expects another round of rate cuts will follow the two recent rate reductions.

China’s central bank, the People’s Bank of China, recently made two consecutive cuts in its benchmark interest rates on June 8 and July 6, although the PBOC has kept rates steady since.

HSBC’s China Manufacturing PMI is taken from data that includes questionnaire sent to purchasing executives of more than 420 firms in the manufacturing sector.

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