China Manufacturing Contraction Gains Momentum

March 24th, 2015
in News, econ_news, syndication

breaking-news-130px7Econintersect: China's manufacturing sector reported the lowest PMI (Purchasing Managers' Index) reading in eleven months with a March 2015 HSBC/Markit "Flash" (preliminary) survey result of 49.2. Readings below 50 reflect a contracting manufacturing sector. The expectation had been for a reading of 50.6, according to Reuters.  This was down from a February reading of 50.7 and was the third reading below 50 in the last four months.  Analysts quoted by Reuters indicated expectations are raised for monetary loosening by the PBoC (People's Bank of China) because of the weakness in manufacturing.

Follow up:

Chinese companies cut their workforce numbers again in March, and at a steeper rate than seen for the several most recent months.  However, order backlogs remained positive, although less so than any time since 3Q 2014. The entrenched disinflation and deflation in Chinese manufacturing was reflected by continuing  declines in both input prices and output charges.  The most positive part of the report:  Production continued to expand.  But that was offset by the negative: new orders and exports contracted.




Annabel Fiddes, Economist at Markit, commented on the latest report:

"The HSBC Flash China Manufacturing PMI signalled a slight deterioration in the health of China's manufacturing sector in March. A renewed fall in total new business contributed to a weaker expansion of output, while companies continued to trim their workforce numbers. Meanwhile, manufacturing companies continued to benefit from falling input costs, stemming from the recent global oil price decline. 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."


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