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Although manufacturing was at a two-month high, the survey barely showed improvement in the headline number. And manufacturing stayed below the contractionary reading of 50.
The details of the report were ugly as well. Most indices contracted some at a faster pace than others.
Output plunged to 47, the lowest level in 10-months, and down from 48.2 in August. New export orders also declined, showing weak external demand, but they contracted at a slower rate than the previous month.
In a press release, HSBC’s chief economist Hongbin Qu wrote that the slowdown in manufacturing was stabilising.
“China’s manufacturing growth is still slowing, but the pace of slowdown is stabilising. Manufacturing activities remain lacklustre, thanks to weak new business flows and a longer than expected destocking process. And this is adding more pressures to the labour market and has prompted Beijing to step up easing over the past weeks. The recent easing measures should be working to lead to a modest improvement from 4Q onwards.”
Here’s the latest HSBC Flash PMI chart:
And here are all the ugly details from the report:
Despite the deceleration in the Chinese economy, it is still looked to as an engine of growth for the global economy.
Further deterioration in its manufacturing sector would certainly come as a blow to markets.
Unfortunately, massive stimulus looks increasingly unlikely.
The PMI reports are considered one of the more reliable economic indicators out of China. And those watching how the Chinese economic slowdown plays out will be watching the HSBC Flash PMI number, out at 10:30 p.m. ET, very closely. This is the preliminary reading for the final number, which comes out at the beginning of next month.
China’s final HSBC PMI number for August showed that manufacturing had crumbled in August, with the number declining to 47.6, the lowest level since March 2009. When the August Flash PMI number fell to 47.8, SocGen’s Wei Yao described it as “plainly awful”.
The official reading from the National Bureau of Statistics declined to 49.2 in August, down from 50.1 the previous month.
We have previously explained the difference between the flash and official PMI numbers, but the most significant takeaway has been that both numbers have been deteriorating. China’s industrial production in August also fell to its lowest level in three years.
The direction of this manufacturing report is going to be crucial and we’ll be looking for signs of improvement across the sub-indices like export orders as well.
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