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Slowdown in China Manufacturing Sector

slowdown china manfactureActivity in China’s factory sector dipped to a 11-month low in March as new orders shrank, a private survey showed, signalling persistent weakness in the world’s second-largest economy that will likely fuel calls for more policy easing to support growth.

The numbers signaled a “slight deterioration” in Chinese manufacturing, said the report, which found decreases in sub-indexes for new orders, new export orders and employment. It was the first report since the Lunar New Year holiday, which tends to distort economic data because it falls at a different time in January or February each year.

The reading is the first gauge after China’s Lunar New Year holiday, which tends to distort economic data for January and February and so is closely watched. Following the release of the PMI reading, shares of Hong Kong-listed Chinese firms led the Hang Seng Index lower by 0.3%, while the Shanghai Composite Index was down 0.4%, breaking a nine-day winning streak.

“With firm performance and the labor market both in decent shape, the absence of heavy stimulus should be surprising only to those analysts who still make policy predictions based on GDP,” Leland Miller, president of CBB, wrote in the report. Policymakers have acted in recent months to counter slowing growth by cutting interest rates and lowering minimum reserve levels for banks and Evans-Pritchard said he expected more of the same in coming months. The preliminary PMI figure, also called the HSBC Flash China PMI, is based on 85% to 90% of total responses for HSBC’s PMI survey each month, and is issued about one week before the final PMI reading. HSBC PMI is weighted more heavily toward smaller, private-sector companies, while an official PMI gauge due April 1 focuses more on larger companies.