China’s PMI Data Declines In The First Quarter Of 2014

Biswajit Yadav / 24 Mar 2014

China’s PMI Data Declines In The First Quarter Of 2014

According to the latest HSBC Purchasing Managers’ Index of China, the Asian Economic powerhouse suffered a contraction in their manufacturing engine. The PMI data fell down to an 8 month low at 48.1 out of 50 level, which is a benchmark to measure the PMI data.

HSBC, one of the world’s largest banking and financial services organisations has came up with flash China manufacturing Purchasing Managers' Index (PMI) data for the month of March 2014. According to the HSBC PMI data released on March 24, 2014, China's manufacturing engine has contracted in the first quarter of 2014. The HSBC Purchasing Managers' Index (PMI) fell to an eight-month low at 48.1 in March from February's final reading of 48.5.  This indicates that the index has remained below 50 level since January this year. A PMI under 50 represents contraction of the manufacturing sector, compared to the previous month.

According to the data released by HSBC, Chinese manufacturers signaled reductions of both output and new orders in the month of March but new export orders grew for the first time in the last four months, suggesting the slowdown has been driven primarily by the weak domestic demand. Due to weak operational activities the employment has reduced for the month of March and also due to reduced volumes of new business the firms were able to lower their amount of unfinished work. A less number of new orders also led companies to reduce their purchasing activity in February.

For the Chinese economy the input prices and the output prices both have decreased but the input price is reducing at a slower rate, while the output prices are reducing at a faster rate. The supplier delivery time is shortening. The shorter delivery times means the supplier has become less busy as the demand of the products are falling. A shorter delivery time is often indicative of a shift to a buyer’s market, with suppliers often keen to offer discounts to generate sales.

Commenting on this, Hongbin Qu, Chief Economist for China at HSBC said, China’s growth momentum continued to slow down. Weakness is broadly-based with domestic demand softening further. We expect Beijing to launch a series of policy measures to stabilise growth. Likely options include lowering entry barriers for private investment, targeted spending on subways, air-cleaning & public housing and guiding lending rates lower.”

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