China manufacturing output weakest in two years

Posted on 3 Aug 2015 by Callum Bentley

Factory activity in China has fallen at the highest rate in two years throughout July.

The private Caixin/Markit manufacturing purchasing managers’ index (PMI) dropped to 47.8 in July from 49.4 in the previous month.

It is worse than a preliminary reading of 48.2 and is the fifth consecutive month of contraction in the sector.

The results released over the weekend, which focus on small to mid-sized firms, mirror an economy which is showing signs of gradual easing.

Weaker market conditions and an associated downturn in client demand contributed to a third successive monthly contraction of manufacturing production in July. Moreover, the latest reduction in output was the sharpest seen in 44 months.

Chinese manufacturing slows for August
China has the world’s second largest economy.

The PMI which focuses on large firms fell to 50 in July from 50.2.

Staff numbers at Chinese manufacturers declined for the twenty-first consecutive month in July. Despite the rate of job shedding easing since June, it was marked overall.

According to anecdotal evidence, employment fell due to company down-sizing policies that were implemented in light of softer client demand. Backlogs of work meanwhile rose at a marginal pace that was identical to that recorded in June, with some panellists mentioning that reduced output had led to greater amounts of unfinished work.

Average input costs faced by Chinese manufacturing companies declined again in July. Furthermore, the rate of reduction accelerated to the sharpest seen since April.

Reports from panellists suggested that lower raw material costs had reduced overall cost burdens. Average selling prices also fell in July, and at the sharpest rate since January, with a number of firms cutting their charges due to increased competition for new work.