Barefoot Investor: China HSBC Flash PMI falls to 49.4 in Sept

HSBC's China Flash PMI showed the Chinese factory sector contracted for a third consecutive month in September as both new orders and new export orders fell on slack global demand.

The flash Purchasing Managers' Index (PMI), designed to preview China's factory output before official data, was 49.4 in September, down from August's final reading of 49.9 and hovering below the 50-point mark for the third straight month.

Still, HSBC believes a PMI reading of as low as 48 in China still points to annual growth of 12-13 percent in industrial output and 9 percent expansion in gross domestic product, even if it indicates a contraction in factory activity on the month.

"Fears of a hard landing are unwarranted. External demand weakened a little, but official trade data still show solid export growth," said Qu Hongbin, China economist at HSBC.

"Resilient domestic demand is sufficient to support around 8.5-9 percent growth in the coming quarters," he said.

Both new orders and new export orders sub-indices fell further below the 50-point mark in September, reflecting weaker global demand. Other sub-indices that missed the 50-point mark include those for output, stocks of purchases and employment.

Factory price pressures, on the other hand, picked up in September, indicating Chinese policymakers still face difficult challenges to bring inflation under control.

Annual consumer inflation eased to 6.2 percent in August from a three-year high, while economic activity slowed, underlining expectations that the central bank may hold off on further policy tightening amid fears of a global slowdown.

The input price sub-index rose to 58.8 in September -- the highest in four months.

The flash PMI, compiled by British research firm Markit, is based on up to 90 percent of total responses to a monthly survey and is designed to be a snapshot of HSBC's final PMI.

This is the eighth month that HSBC has published a flash PMI for China. In August, the flash reading was 49.8, compared with the final reading of 49.9. (Reuters)


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