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CHINA'S MANUFACTURING SECTOR IS CONTRACTING

Sam Ro
china hsbc pmi

Markit

China's unofficial HSBC manufacturing PMI report is out and its disappointing.

The headline number fell to 49.2 from 50.4 a month ago.  This was worse than economists' expectation fo 49.6.

A reading below 50 signals contraction.

Here are the key points from Markit:

  • Both total new orders and new export orders decline
  • Output growth maintained, but at marginal rate
  • Purchasing activity falls for the first time in eight months

From HSBC's Hongbin Qu:

“The downward revision of the final HSBC China Manufacturing PMI suggests a marginal weakening of manufacturing activities towards the end of May, thanks to deteriorating domestic demand conditions. With persisting external headwinds, Beijing needs to boost domestic demand to avoid a further deceleration of manufacturing output growth and its negative impact on the labour market. The new leaders should strike a delicate balance between reform and growth.”

On Friday, we learned that China's official PMI report unexpectedly climbed to 50.8 from 50.6 in April.  Economists were looking for a decline to 50.0.

All of this comes on renewed fears that China is slowing down again.

China's HSBC PMI report has a greater weight toward small and medium sized enterprises, which tend to be more sensitive to economic swings.



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