NOT GOOD: Chinese Manufacturing Unexpectedly Contracts

China’s HSBC Flash Manufacturing PMI fell to a six-month low of 49.6 in January. This compares to a 50.5 in December.

This was worse than the 50.3 economists were expecting. And any reading below 50 signals contraction.

This is a preliminary reading. The final numbers will be released on January 30.

Still, this is unwelcome news for those who fear China’s economy is slowing to rapidly.

As the table shows, orders, employment and prices all fell during the period.

“The marginal contraction of January’s headline HSBC Flash China Manufacturing PMI was mainly dragged by cooling domestic demand conditions,” said HSBC’s Hongbin Qu. “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.”

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