Sunday, August 31, 2014

China's final HSBC PMI falls to 3-month low in August



BEIJING (Reuters) – Growth in China‘s large factory sector slipped to a three-month low in August as foreign and domestic demand cooled, a private survey showed on Monday, raising concerns that the economy is faltering after a bounce.


The final HSBC/Markit Purchasing Managers’ Index (PMI) retreated to 50.2 in August, roughly in line with a preliminary reading of 50.3 and only a shade above the 50-point mark that demarcates an expansion in activity from a contraction.


China’s official manufacturing PMI for August, reported on Monday, was 51.1, compared with 51.2 in a Reuters poll and July’s 51.7.


A breakdown of the official survey showed output, employment, new orders, delivery time and raw material inventory all fell across the board, with the labour market showing the most weakness.


China and Hong Kong stock markets rose slightly after the HSBC and official PMIs came out. Regional currencies did not move on the numbers.


In the HSBC survey, demand appeared to have softened across the board in August.


New orders and new export orders – proxies for domestic and foreign demand, respectively – fell to their lowest in two to three months, but managed to hold above the 50-point level.


The new orders sub-index was the worse performer of the two, shedding two full points to 51.3 from July.


The underwhelming performance may reinforce bets that China would further loosen fiscal and monetary policies to stoke growth in the world’s second-biggest economy.


“The economy still faces considerable downside risks to growth in the second-half of the year, which warrants further policy easing,” said Qu Hongbin, an economist at HSBC.


Firms had reported “subdued client demand” for new orders, especially for those selling investment goods, the PMI showed.


Lacklustre final demand weighed on the labour market, which shrank the most in three months in August as companies fired workers or declined to fill job vacancies as to reduce costs.


The broad cool down in activity caused production prices and final sales prices to fall, the survey showed, adding that a number of companies had cut spending on steel in particular.


ROCKY SPELL


China’s economy has had a rocky spell this year. Growth sunk to an 18-month low of 7.4 percent in the first quarter before edging up to 7.5 between April and June.


Yet hopes that the mild rebound may gain traction were scuttled last month when growth in retail sales and fixed asset investment slowed, while money injected into the economy unexpectedly tumbled to a near six-year low.


A Reuters poll in July showed economists were divided over whether the central bank would attempt to boost lending by reducing the amount of deposits that banks must set aside as reserves.


The poll showed half of 14 economists polled thought the central bank would reduce the reserve requirement ratio (RRR) by 50 basis points between October and March next year. Only one of 15 economists polled predicted a cut in interest rates.


Worried that the economy was cooling too quickly, Chinese authorities started loosening policy in modest steps from April by accelerating some construction projects, lowering the RRR for some banks, and relaxing property controls to boost a cooling housing market.


Just last week, the central bank said it was lowering its re-lending interest rates for agricultural loans by 100 basis points. The government in Hangzhou – one of the Chinese cities worst hit by an oversupply of homes – also said it will abolish all home purchase restrictions in the city.


(Reporting by Koh Gui Qing; Editing by Richard Borsuk)





China's final HSBC PMI falls to 3-month low in August

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