HSBC China Flash PMI fell to a nine-month low of 48.3 in June.
This was below expectations for a marginal decline to 49.1, from 49.2 in May.
A reading below 50 indicates contraction.
“The HSBC China Flash Manufacturing PMI dropped to a nine-month low of 48.3 in June, following on the sequential reduction in both production and demand,” wrote HSBC's Hongbin Qu in a press release.
“Manufacturing sectors are weighed down by deteriorating external demand, moderating domestic demand and rising destocking pressures. Beijing prefers to use reforms rather than stimulus to sustain growth. While reforms can boost long-term growth prospects, they will have a limited impact in the short term. As such we expect slightly weaker growth in 2Q.”
An expansion in the inventory of finished goods, albeit at a slower rate, is also worrisome as China continues to cope with an excess capacity problem.
Here's a look at the trajectory of headline PMI:
Here's a look at how the sub-indices performed:
China's official PMI report unexpectedly climbed to 50.8 in May.
One of the key differences between the two reports are the survey size. The National Bureau of Statistics PMI survey looks at responses of 3,000 companies in 21 industries. This compares with about 430 companies surveyed by HSBC.
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