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China factory activity slumps to 32-month low | Reuters
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China factory activity slumps to 32-month low
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Wed, Nov 23 02:13 AM EST
By Koh Gui Qing
BEIJING (Reuters) - Chinese factories battled with
their weakest activity in 32 months in November,
a preliminary purchasing managers' survey
showed, reviving worries that China may be
skidding toward an economic hard landing and
compounding global recession fears.
The HSBC flash manufacturing purchasing
managers' index (PMI), the earliest indicator of
China's industrial activity, slumped in November
to 48, a low not seen since March 2009.
The data showed the world's growth engine is
not immune to economic troubles abroad, and
could further unnerve financial markets already
roiled by Europe's deteriorating debt crisis.
November's flash reading is a sharp three-point
fall from October's final figure of 51 and indicated
Chinese factory output shrank on the month in
November. A PMI reading of 50 demarcates
expansion from contraction.
The last time the PMI slipped below 50 was in
September, when the index hit 49.9.
"Industrial production growth is likely to slow
further to 11-12 percent year-on-year in coming
months as domestic demand cools and external
demand is set to weaken," said Qu Hongbin, a
HSBC economist.
In line with the dismal headline number, the flash
output sub-index tumbled to a 32-month low of
46.7, a steep drop from October's final reading
of 51.4.
The marked slowdown in activity cooled factory
inflation sharply. The sub-indices for input and
output prices sunk around 10 points each to
below 50, hugging lows last seen in April 2009.
New export orders were the only bright spot in
the survey, holding steady from October to stay
above 50.
But the sub-index for new orders suffered its
biggest drop in 1- years to sink well below the
50-point mark, suggesting factories received
fewer orders on the whole in November even
though export orders held up.
Unlike China's official PMI which is published by
Beijing and tilts toward large state firms, the
HSBC PMI surveys are skewed toward private
companies that have been harder hit by China's
monetary tightening campaign.
As recent as July, China raised interest rates for
the third time this year in a bid to calm rising
consumer prices.
STILL A SOFT LANDING?
Weighed by tight domestic monetary conditions
and waning demand in its two biggest export
markets, Europe and the United States, China's
economy lost steam in the third quarter and all
signs suggest it would slow further.
Easing activity puts pressure on Beijing to relax
monetary policy at the margins by loosening
bank lending restrictions, for instance. But until
Europe's crisis gets out of hand, few analysts
think China is ready to cut interest rates.
Growth in exports hit eight-month lows in
October as manufacturing output grew at its
weakest in a year. The exuberant Chinese
property market is also coming off a boil to drag
on real estate construction and investment.
But HSBC's Qu argued China is still headed for a
soft-landing as cooling inflation gives Beijing
more room to ease policy and support
economic growth if needed.
"As inflation is likely to decelerate at a faster-than-
expected pace, it will leave more room for
Beijing to step up selective easing measures,
which should gradually filter through to keep
China on track for a soft-landing," he said.
A slackening economy pulled China's inflation to
5.5 percent in October, down from three-year
peaks of 6.5 percent struck in July.
The flash PMI is based on up to 90 percent of
total responses to the monthly survey and is a
snapshot of the final data. HSBC stared
publishing the series in February.
.
.
.
China factory activity slumps to 32-month low
.
Wed, Nov 23 02:13 AM EST
By Koh Gui Qing
BEIJING (Reuters) - Chinese factories battled with
their weakest activity in 32 months in November,
a preliminary purchasing managers' survey
showed, reviving worries that China may be
skidding toward an economic hard landing and
compounding global recession fears.
The HSBC flash manufacturing purchasing
managers' index (PMI), the earliest indicator of
China's industrial activity, slumped in November
to 48, a low not seen since March 2009.
The data showed the world's growth engine is
not immune to economic troubles abroad, and
could further unnerve financial markets already
roiled by Europe's deteriorating debt crisis.
November's flash reading is a sharp three-point
fall from October's final figure of 51 and indicated
Chinese factory output shrank on the month in
November. A PMI reading of 50 demarcates
expansion from contraction.
The last time the PMI slipped below 50 was in
September, when the index hit 49.9.
"Industrial production growth is likely to slow
further to 11-12 percent year-on-year in coming
months as domestic demand cools and external
demand is set to weaken," said Qu Hongbin, a
HSBC economist.
In line with the dismal headline number, the flash
output sub-index tumbled to a 32-month low of
46.7, a steep drop from October's final reading
of 51.4.
The marked slowdown in activity cooled factory
inflation sharply. The sub-indices for input and
output prices sunk around 10 points each to
below 50, hugging lows last seen in April 2009.
New export orders were the only bright spot in
the survey, holding steady from October to stay
above 50.
But the sub-index for new orders suffered its
biggest drop in 1- years to sink well below the
50-point mark, suggesting factories received
fewer orders on the whole in November even
though export orders held up.
Unlike China's official PMI which is published by
Beijing and tilts toward large state firms, the
HSBC PMI surveys are skewed toward private
companies that have been harder hit by China's
monetary tightening campaign.
As recent as July, China raised interest rates for
the third time this year in a bid to calm rising
consumer prices.
STILL A SOFT LANDING?
Weighed by tight domestic monetary conditions
and waning demand in its two biggest export
markets, Europe and the United States, China's
economy lost steam in the third quarter and all
signs suggest it would slow further.
Easing activity puts pressure on Beijing to relax
monetary policy at the margins by loosening
bank lending restrictions, for instance. But until
Europe's crisis gets out of hand, few analysts
think China is ready to cut interest rates.
Growth in exports hit eight-month lows in
October as manufacturing output grew at its
weakest in a year. The exuberant Chinese
property market is also coming off a boil to drag
on real estate construction and investment.
But HSBC's Qu argued China is still headed for a
soft-landing as cooling inflation gives Beijing
more room to ease policy and support
economic growth if needed.
"As inflation is likely to decelerate at a faster-than-
expected pace, it will leave more room for
Beijing to step up selective easing measures,
which should gradually filter through to keep
China on track for a soft-landing," he said.
A slackening economy pulled China's inflation to
5.5 percent in October, down from three-year
peaks of 6.5 percent struck in July.
The flash PMI is based on up to 90 percent of
total responses to the monthly survey and is a
snapshot of the final data. HSBC stared
publishing the series in February.
