China PMI Drops After Fall in Orders

Conditions in China’s manufacturing sector deteriorated in February, according to the HSBC China Manufacturing Purchasing Managers’ Index. The index fell to 48.5, down from 49.5 in January. It was up from the Flash reading of 48.3 earlier in the month.

 

Both output and new orders dropped in February for the first time since July 2013. As a result, businesses reduced their staffing levels at the quickest pace in nearly five years.  Input costs and output charges declined at their fastest rate in eight months. New export orders also fell but at a modest pace.

 

“The final reading of the HSBC China Manufacturing PMI confirmed the weakness of manufacturing growth," says Qu Hongbin, Chief Economist for Greater China and Co-Head of Asian Economic Research, HSBC. "Signs become clear that the risks to GDP growth are tilting to the downside. This calls for policy fine-tuning measures to stabilise market expectations and steady the pace of growth in the coming quarters.”

 

Companies reduced purchasing activity largely because of a drop in new orders. It is the first time that input buying has decreased since July 2013.

 

The PMIs are based on data compiled from monthly replies to questionnaires sent to purchasing executives in manufacturing companies. A reading above 50 indicates expansion, while one below 50 signals contraction.
 

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