China flash PMI rises in August

China flash PMI rises in August

HSBC’s China Flash PMI showed the Chinese factory sector may have slowed slightly in August from July as new orders and new export orders eased on languid overseas demand.

The flash Purchasing Managers’ Index (PMI), designed to preview China’s factory output before official data, edged up to 49.8 in August, from July’s final reading of 49.3.

That leaves the index a touch under the 50-point mark that demarcates expansion from contraction in economic activity. HSBC publishes its final China PMI index for August on Sept 1.

But HSBC said it believes a PMI reading of as low as 48 in China still points to annual growth of 12-13 per cent in industrial output and 9 per cent expansion in gross domestic product, even if it indicates a contraction in factory activity on the month.

“Risks of a hard landing are still remote,” said Qu Hongbin, an economist at HSBC. “This provides leeway for the People’s Bank of China to keep the current tightening measures in place.”

Focusing on the bright side, Qu noted that even though the new export orders sub-index was hovering below 50, it had rebounded to a three-month high of 49.6.

Other sub-indices that missed the 50-point mark include those for output, new orders, stocks of purchases and employment.

Price pressures, on the other hand, did not ease. Factory inflation was little changed, while the output price sub-index rose further above the 50-point level.

The flash PMI, compiled by British research firm Markit, is based on up to 90 per cent of total responses to a monthly survey and is designed to be a snapshot of HSBC’s final PMI.

This is the seventh month that HSBC has published a flash PMI for China. In July, the flash reading was 48.9, compared with the final reading of 49.3.

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