HSBC flash PMI sinks to a 7-month low

China Daily (Canada) - - BUSINESS - By CHEN JIA chen­jia1@chi­

China’s man­u­fac­tur­ing ac­tiv­i­ties are likely to con­tract for a sec­ond con­sec­u­tive month in Fe­bru­ary, reach­ing their low­est point since July, Bri­tish bank HSBC Hold­ings Plc said on Thurs­day.

The man­u­fac­tur­ing Pur­chas­ing Man­agers’ In­dex is fore­cast to drop to a seven-month low of 48.3 from 49.5 in Jan­uary and 50.5 in De­cem­ber, due to slumps in each sub-in­dex, in­clud­ing out­put, new or­ders and em­ploy­ment, HSBC said.

The flash read­ing of the HSBC man­u­fac­tur­ing PMI in Fe­bru­ary may have re­flected re­newed de­stock­ing ac­tiv­i­ties as new or­ders and pro­duc­tion con­tracted, said Qu Hong­bin, chief econ­o­mist in China and co-head of Asian Eco­nomic Re­search at the bank.

“The build­ing up of dis­in­fla­tion­ary pres­sures im­plies that the un­der­ly­ing mo­men­tum for man­u­fac­tur­ing growth could be weak­en­ing,” said Qu, who still ex­pressed con­fi­dence about the govern­ment’s cur­rent pol­icy and pos­si­ble fine-tun­ing to sta­bi­lize growth.

Louis Kuijs, chief econ­o­mist in China at the Royal Bank of Scot­land, said “not to read too much” into the weak Fe­bru­ary PMI read­ing as the Lu­nar New Year hol­i­days made it dif­fi­cult to in­ter­pret the fig­ure.

“We re­main quite con­fi­dent that most of China’s growth driv­ers re­main in place, and the global econ­omy is re­cov­er­ing, and this will help China’s econ­omy, too,” he said.

Kuijs said the econ­omy will not slow dra­mat­i­cally, be­cause of strong credit and fi­nanc­ing sup­port that was re­leased by the cen­tral bank.

In Jan­uary, new loans in­creased to 1.32 tril­lion yuan ($218 bil­lion), com­pared with 482.5 bil­lion yuan in De­cem­ber, and to­tal so­cial fi­nanc­ing rose to 2.58 tril­lion yuan from 1.23 tril­lion yuan in De­cem­ber, data from the People’s Bank of China, the coun­try’s cen­tral bank, showed. The growth rates of both read­ings were higher than ex­pected.

The cen­tral bank high­lighted the facts that the econ­omy’s de­pen­dence on in­vest­ment and debt fi­nanc­ing continues to rise and that po­ten­tial risks in the fi­nan­cial sec­tor are the key con­cerns.

Wor­ries about a fur­ther slow­down in the Chi­nese econ­omy sur­faced af­ter the fourth quar­ter of 2013, when the govern­ment re­leased no sig­nals about eas­ing mon­e­tary pol­icy in the short term.

The of­fi­cial man­u­fac­tur­ing PMI for Jan­uary dropped to a six-month low of 50.5 from 51 in De­cem­ber and 51.4 in Novem­ber, lower than mar­ket ex­pec­ta­tions, ac­cord­ing to the Na­tional Bureau of Sta­tis­tics.

The China MNI busi­ness sen­ti­ment in­dex fell fur­ther in Fe­bru­ary to 50.2, com­pared with 52.2 in Jan­uary and 58.4 in De­cem­ber, ac­cord­ing to a re­search note from No­mura Se­cu­ri­ties Co Ltd.

Zhang Zhi­wei, chief Chi­nese econ­o­mist at No­mura, said: “We con­tinue to be­lieve that China’s mon­e­tary pol­icy stance has a mod­er­ate tight­en­ing bias and ex­pect GDP growth to slow to 7.5 per­cent in the first quar­ter and 7.1 per­cent in the sec­ond, de­spite fa­vor­able base ef­fects.”

In 2013, the growth of the world’s sec­ond-largest econ­omy slowed to 7.7 per­cent from 7.8 per­cent dur­ing the third quar­ter.

The govern­ment will likely loosen mon­e­tary pol­icy in the sec­ond quar­ter to sup­port the econ­omy if the govern­ment de­cides to keep its 7.5 per­cent growth tar­get for this year.

A re­search note from North Square Blue Oak Ltd, a United King­dom in­vest­ment bank, said that given con­cerns re­gard­ing the over­all slow­down, the govern­ment is ex­pected to sup­port more small and medium-sized en­ter­prises in its re­form scheme, a po­ten­tial hot topic in next month’s Na­tional People’s Congress and Chi­nese People’s Po­lit­i­cal Con­sul­ta­tive Con­fer­ence ses­sions.

“The State Coun­cil has just re­moved the min­i­mum reg­is­tered cap­i­tal re­quire­ment for star­tups and showed more will­ing­ness to share more de­vel­op­ment op­por­tu­ni­ties in State-owned en­ter­prises re­form and govern­ment projects,” it said.


Trac­tors are loaded in Tengzhou, Shan­dong prov­ince, for de­liv­ery to deal­ers and cus­tomers in north­east­ern China. The flash es­ti­mate for the man­u­fac­tur­ing Pur­chas­ing Man­agers’ In­dex for Fe­bru­ary slid to a seven-month low of 48.3, HSBC Hold­ings Plc said on Thurs­day.

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