China’s Manufacturing Flash PMI Hits A Four-Month Low

The world's second largest economy has seen staggered growth in February 2013. HSBC's latest manufacturing Flash PMI reading at 50.4 indicates that there are some headwinds in the Chinese economy yet. The February 2013 PMI is also the lowest in the last four months.

The January numbers had seen acceleration in most of the economic indicators with a strong surge in the new orders and exports. The work backlog had also increased, indicating enough executable orders. The Flash PMI numbers for February 2013 indicate that the industrial output, new orders and exports have increased at a slower rate while work backlog has decreased. Inventories of finished goods have also decreased in the quarter. Employment has increased at a dull pace as input as well as output prices have shown slower growth.

Speaking to us on condition of anonymity, an economist with one of the foreign brokerage houses said that China may experience some labour related issues going ahead. Inflation will remain stoked and industrial slowdown may be seen in the second half of the year. Broadly, if the Chinese economy shows slower growth, then the commodity prices may also show further softening towards the end of the calendar year.

The recent article in the Wall Street Journal has cited a few economists in China who are concerned about their economy. The article has suggested that the labour conditions remain tight and employers are of the view that the employee costs are rising, which may impact the profitability of the companies as well as the exports since manufacturing costs in China are considered to be the lowest in the world.

China is an export oriented economy and the slowdown in the US and Europe may further impact its exports. The actual PMI numbers may come in sometime next week when the real picture will become clear.