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China PMI drops in February

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China PMI drops in February

“Moderate deterioration” seen in Chinese manufacturing sector.

Chinese manufacturers signaled reductions of both output and new business in February, leading to a moderate deterioration of overall operating conditions. As a result, firms cut their staffing levels again in February and at the quickest pace in nearly five years. Meanwhile, input costs and output charges both declined at their fastest rates in eight months.

After adjusting for seasonal factors, such as the recent Chinese New Year festival, the HSBC Purchasing Managers’ Index™ (PMI™) posted at 48.5 in February, up fractionally from the earlier flash reading of 48.3, and down from 49.5 in January. This signaled a moderate deterioration in the health of the Chinese manufacturing sector.

February data signaled the first contractions of both output and new orders at Chinese manufacturers since July 2013. The rates of decline were moderate in both cases, and were linked by panelists to weaker-than-expected client demand. New business from abroad also declined over the month, and at a modest pace that was little-changed from January.

“The final reading of the HSBC China Manufacturing PMI confirmed the weakness of manufacturing growth.”

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“The final reading of the HSBC China Manufacturing PMI confirmed the weakness of manufacturing growth,” said Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC.  “Signs become clear that the risks to GDP growth are tilting to the downside. This calls for policy fine-tuning measures to stabilise market expectations and steady the pace of growth in the coming quarters.”

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