China’s manufacturing sector hit a six-month low in January, according to the HSBC Flash China Manufacturing Purchasing Managers’ Index (PMI). The index fell to 49.6, from 50.5 in December.
The last time it dropped below 50, signalling a contraction in the sector, was in July when the final PMI fell to 47.7.
Output increased, but at a slower rate, the Flash PMI showed. New orders and new export orders both decreased. Employment fell, at a faster rate, while backlogs of work dropped, in a change of direction.
“The marginal contraction of January’s headline HSBC Flash China Manufacturing PMI was mainly dragged by cooling domestic demand conditions," says Qu Hongbin, Chief Economist for Greater China and Co-Head of Asian Economic Research, HSBC. "This implies softening growth momentum for manufacturing sectors, which has already weighed on employment growth. As inflation is not a concern, the policy focus should tilt towards supporting growth to avoid repeating growth deceleration seen in 1H 2013.”
The Flash PMI is the earliest available indicator of operating conditions in China. It is published around a week before the final PMI data is released and is based on around 85 per cent to 90 per cent of total PMI survey responses.
The Flash China Manufacturing Output Index fell to a three-month low in January. The index was 51.3, down from 51.4 in December.
January’s final PMI is due for release on 30 January 2014.