HSBC China Flash PMI came in at an 11-month low of 47.7 in July.
This missed expectations for PMI to hold steady at 48.2. A reading below 50 indicates contraction.
According to HSBC’s Chief Economist, China and Co-Head of Asian Economic Research Hongbin Qu:
The lower reading of the July HSBC Flash China Manufacturing PMI suggests a continuous slowdown in manufacturing sectors thanks to weaker new orders and faster destocking.
This adds more pressure on the labour market. As Beijing has recently stressed to secure the minimum level of growth required to ensure stable employment, the flash PMI reinforces the need to introduce additional fine-tuning measures to stabilise growth.
With China’s excess capacity woes, it is a positive sign that the stock of finished goods contracted. Right before the PMI release, we saw reports that China’s industry minister is pushing for restructuring in the steel, aluminum, cement and other sectors that are burdened by excess capacity.
Here’s a look at how the sub-indices did:
And here’s a look at how Chinese manufacturing has been doing:
Chinese economic data disappointed markets in June and caused many to panic about the economic slowdown as Q2 GDP came in at 7.5%. Premier Li Keqiang helped calm markets on Monday by saying that 7.5% is the growth floor for 2013.
Today’s Flash PMI report added to signs that the economy is slowing down.
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