More easing seen as China factory survey disappoints
China’s manufacturing sector contracted at its sharpest pace in nine months in August, according to a survey showing falling export orders and rising inventories, a signal that more policy stimulus may be needed to engineer a second half pick-up in growth.
As calls grew louder from analysts and investors for further measures from Beijing to support the economy, China’s central bank today completed its largest weekly injection of funds into the financial system in seven months – a move traders saw as a substitute for a cut in banks’ required reserve ratio.
The HSBC Flash China manufacturing purchasing managers index (PMI) – a preliminary read-out that provides an early peek at data for August – fell to 47.8 this month, its lowest level since November 2011 and well down from July’s final figure of 49.3.
“Inventory numbers are the highest on record. Orders to inventory are the lowest since December 2008. Foreign orders to inventory are the lowest since January 2009. It’s very hard to put a positive spin on anything within the data,” said Robert Rennie, chief currency strategist at Westpac Bank in Sydney.
“Bottom line – a very poor update with some very poor China data to come.”
Falling demand from debt-ridden Europe, China’s single biggest export market, has put the Chinese economy under pressure, with the ripples now being felt throughout eastern Asia.