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China PMI drops into contraction territory

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China PMI drops into contraction territory

“Slight deterioration” seen in Chinese manufacturing sector.

Chinese manufacturing fell into contraction territory in March, according to the flash HSBC/Markit Purchasing Managers Index released today.

The Chinese PMI came in at 49.2 in March, down from 50.7 in February. (Readings above 50.0 indicate expansion.) This signaled a deterioration in the health of the Chinese manufacturing sector.

Analysts had expected a decline to 50.6.

March data signaled a slight increase in output and a fall in new orders at Chinese manufacturers during the month, with falling input prices due to reduced energy costs being insufficient to counteract reduced demand.

“The HSBC Flash China Manufacturing PMI signaled a slight deterioration in the health of China’s manufacturing sector in March,” said Annabel Fiddes, Economist at Markit. “A renewed fall in total new business contributed to a weaker expansion of output, while companies continued to trim their workforce numbers. Meanwhile, manufacturing companies continued to benefit from falling input costs, stemming from the recent global oil price decline. However, relatively muted client demand has led firms to pass on savings in a bid to boost new work, and cut their selling prices at a similarly sharp rate.”

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