Surveys reveal slowdown in Chinese manufacturing activity

| July 1, 2010 | 0 Comments

There is evidence today that China’s economy is cooling after two official independent surveys revealed a slowdown in manufacturing activity.

The HSBC China Manufacturing purchasing managers index (PMI), fell from 52.7 in May to 50.4 in June.

While the index experienced a drop, it is still just above the crucial 50 mark, which means the sector is growing.

HSBC chief China economist Qu Hongbin comments: “The moderation in the manufacturing PMI implies slower sequential growth in China’s manufacturing sector, partly due to the tightening measures taking effect.”

Meanwhile, a separate survey released by the China Federation of Logistics and Purchasing showed manufacturing activity fell to 52.1 in June from 53.9 the previous month - again, a fall, but above the crucial 50 level.

Royal Bank of Canada senior analyst Brian Jackson said: “Policy tightening put in place in recent months also is starting to have an impact on activity.”

China’s economy, which is the world’s third largest, expanded at an annualised rate of 11.9% in the first three months of the year.

However, despite the strong growth, economists have cautioned that the economy is expanding too quickly.

In addition, Chinese inflation continues to increase on the back of rising house and food prices.

The rate is currently just above the Government’s target of 3% and has raised expectations that that Beijing may increase interest rates.

Many economists believe higher interest rates would help the economy avoid inflationary pressures.

Tags: , , China Federation of Logistics and Purchasing, cooling, , , , , , , pressures

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