PMI registers slight rebound
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Shanghai Daily, August 24, 2011
China's manufacturing activities improved slightly in August but still may have contracted for the second time in a year, according to a HSBC survey released Tuesday.
A preliminary reading of the HSBC Purchasing Managers' Index showed a rebound to 49.8 from a final reading of 49.3 for July. This was the second month - July being the first - the HSBC Flash PMI fell below the reading of 50. A reading of more than 50 indicates expansion and one of less than 50 means contraction.
The low reading was attributed to tighter monetary policies, higher production costs and sluggish overseas demand.
"The data suggest that the hard landing risk is still remote. This provides leeway for the People's Bank of China to keep the current tightening measures," Qu Hongbin, chief economist for China at HSBC, said.
Qu noted that although the new export orders sub-index was below 50, it had rebounded to a three-month high of 49.6, which should alleviate concerns of an overly-rapid cooling in the Chinese economy.
Other sub-indices that missed the 50-point mark include those for output, new orders, stocks of purchases, and employment.
Inflation did not ease as both input and output prices of factories rose at faster rates, the sub-indexes show.
"The HSBC PMI is more sensitive to slower global economic growth and China's tightening measures as it leans towards smaller companies and exporters," said Lu Ting, a Hong Kong-based economist at Bank of America Merrill Lynch.
He said he expected China's economic growth to ease to around 9 percent in the second half of 2011, from 9.6 percent in the first half.
He predicted the People's Bank of China will neither increase nor cut interest rates and reserve requirement ratio in the remainder of the year to balance the need to control inflation and concerns over a sluggish global economy.
HSBC's Flash PMI is based on 85 to 90 percent of responses to a survey of executives in over 400 firms.
The official manufacturing index released by the National Bureau of Statistics and the China Federation of Logistics and Purchasing, which focuses on state-owned enterprises, registered a reading of 50.7 in July.
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