China manufacturing activity contracts for 11th month

17  January 2013

HONG KONG — China’s manufacturing activity slowed down for the 11th consecutive month, HSBC said Saturday, while data in September showed that the rate of deterioration eased marginally.

The final reading of the HSBC Purchasing Managers’ Index (PMI) released on Saturday posted 47.9 in September, up slightly from 47.6 in August, and signaled an 11th successive month-on-month deterioration in Chinese manufacturing sector operating conditions. However, the latest data signaled the rate of deterioration eased marginally.

Data in September signaled a stronger decline in Chinese manufacturing output, as the volume of new orders fell for the 11th consecutive month. New export orders declined at the sharpest rate in 42 months amid reports of weak international demand, while lower workloads were linked to a fall in backlogs of work.

The rate of reduction in manufacturing output in China accelerated during September, signaling the strongest contraction since March. A number of respondents that reported a fall in production levels attributed this to lower order volumes as both domestic and international demand weakened.

However, the rate of reduction in new export orders remained stronger than the decline in overall new orders. Panelists commented on tough trading conditions in a number of key trading markets.

Purchasing activity fell in China’s manufacturing sector for a fifth successive month during September. The rate at which input buying declined accelerated to the fastest since February.

As a result, stocks of purchases fell in September at the quickest rate since May, as companies sought to utilize inventories wherever possible in production. Meanwhile, average lead times improved for the fifth consecutive month. Survey respondents reported that muted demand for inputs and fewer orders placed to vendors resulted in quicker delivery times.

Hongbin Qu, chief economist of China and cohead of Asian Economic Research at HSBC, believed that Chinese manufacturing growth is likely to be bottoming out.

“However, the sharper contraction of new export orders and the lingering pressures on job markets mean that Beijing should step up easing to support growth and employment. Fiscal measures should play a more important role in the coming months,” he said.