Flash HSBC PMI at 11-month low in March as new orders fall
Print Edition
CHINA’S manufacturing activity may have fallen to the lowest level in nearly a year this month as new orders dropped.
The HSBC Flash China Manufacturing Purchasing Managers’ Index, the earliest available indicator of China’s industrial sector, landed at an 11-month low of 49.2 in March, dropping below the demarcation line of 50 — which separates expansion from contraction — because of deteriorating demand at home and abroad, according to HSBC and research firm Markit.
The February reading was 50.7, which pointed to an increasing industrial activity for the first time in four months.
Qu Hongbin, chief economist for China at HSBC, said yesterday that the components signaled a slight deterioration in the health of China’s manufacturing sector in March.
“A renewed fall in total business contributed to a weaker expansion of output, while companies continued to trim their workforce numbers,” Qu said.
He said companies also benefited from falling input costs largely due to the recent decline in the global oil prices.
“However, relatively muted client demand has led firms to pass on savings in a bid to boost new work, and cut their selling prices at a similarly sharp rate,” Qu said.
The components showed that production decreased to 50.8 in March from 51.7 a month earlier, alongside a drop in new orders to an 11-month low of 49.3. The fall in employment index also accelerated, while new export orders moderated for a second month, albeit at a slower pace.
Chang Jian, an economist at Barclays, said the deteriorating PMI confirmed that downside risks to China’s growth had started to materialize. “We expect downside risks, including the property market correction and elevated local government debt, to prevail in the near term,” Chang said.
“The slowdown is partially cushioned by more government-led infrastructure investment.”
Barclays revised its Chinese economic growth forecast to 6.8 percent this year, down from the previous 7 percent, in view of the likely weaker-than-expected growth in the first quarter.
China also lowered its economic growth target to around 7 percent for this year from around 7.5 percent for 2014. The actual rate landed at 7.4 percent last year, the slowest pace in 24 years. The Asian Development Bank expects China’s economy to grow 7.2 percent in 2015 and 7 percent in 2016.
To counter the weakness, China’s central bank announced a surprising interest rate cut on the last day of February. It was the second time in three months and followed a reduction of reserve requirement ratio in early February.
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