Chinese manufacturing slumps to nine-month low

Posted on 2 Jul 2013

The world's second largest economy showed signs of contraction yesterday as China's purchasing managers' index (PMI) fell to its lowest point in nine months.

The country’s PMI fell to 50.1, down from 50.8 in May. PMI is assesses the manufacturing output of a country.

This left the PMI figure perilously close to 50, where expansion separates from contraction. Figures showed growth in the sector had slowed to a near standstill.

This is particularly worrying for an economy that relies heavily on manufacturing and exports.

HSBC also said that manufacturing activity in the country fell to a nine-month low in a survey of smaller firms.

The bank’s PMI for China fell to 48.2 in June, down from 49.2 in May.

A slowdown in the US and eurozone markets have had a negative effect on China’s manufacturing and exports, leading to a direct impact on its overall economic growth.

China is now at serious risk of missing its official annual growth target of 7.5% this year.

“The weak PMI reinforces our view that there is 30% chance GDP may drop below 7% in the third or fourth quarter,” said Zhiwei Zhang, the chief China economist at Nomura in Hong Kong.

Last month, the World Bank cut its growth forecast for China, saying that rebalancing efforts had slowed its economy.