Chinese manufacturing activity contracted for the second straight month in September, according to an official survey released on Thursday, which suggests that the chances of another interest rate cut by the People’s Bank of China is likely.

The official purchasing manager’s index (PMI) came in at 49.8 last month, after a reading of 49.7 in August. Readings below 50 indicate contraction.

 

The latest private Caixin China survey data signalled the quickest deterioration in operating conditions faced by Chinese manufacturers since March 2009 — the Caixin index focuses on small and medium-sized companies in China in contrast with big SOEs (state-owned enterprises). The former often have difficulties in securing credit from the state-led banking system.

Total new work fell at the quickest rate in over three years, partly driven by a steeper fall in new export business. As a result, companies cut output at the sharpest rate in six-and-a-half years, while staff numbers fell at the quickest pace since the start of 2009. Reduced production schedules also prompted firms to lower their purchasing activity again in September, while disappointing sales led to the strongest increase in stocks of finished goods for over three years.

On the price front, both input costs and output charges fell at sharper rates. Adjusted for seasonal factors, the PMI – a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy – registered at 47.2 in September, down fractionally from 47.3 in August. The health of the sector has now deteriorated in each of the past seven months. Furthermore, the latest deterioration was the most marked since March 2009.

Growth in the Japanese manufacturing sector slowed in September. Production increased at the weakest rate in the current five-month period of expansion, and one that was softer than the average seen this year so far. Meanwhile, new orders from abroad declined at the fastest rate in over two-and-a-half years. Subsequently, employment and buying activity decreased.

In contrast, total new orders increased at a rate similar to August’s seven-month high. On the price front, input costs rose, albeit at only a marginal rate, while output charges decreased.

The headline Nikkei Japan Manufacturing PMI is derived from indicators for new orders, output, employment, suppliers’ delivery times and stocks of purchases. Any figure greater than 50.0 indicates overall improvement of sector operating conditions.

The headline PMI posted at 51.0, down from 51.7 in August (the highest reading since January), thereby indicating a slower rate of expansion in the Japanese manufacturing sector. Furthermore, the latest reading dropped to a three-month low.

China manufacturing PMISeptember PMI data pointed to a general slowdown in the contraction of the South Korean manufacturing sector. Both production and new orders decreased at slower rates and were modest overall. As a result, buying activity at South Korean goods producers fell at a softer pace. Meanwhile, employment declined, albeit at the weakest rate in the current six-month sequence of reduction. On the price front, input and output prices both decreased, with the latter falling at the fastest rate in 78 months.

The headline Nikkei South Korea Manufacturing PMI posted at 49.2, up from 47.9 in August, thereby indicating a softer rate of decline in operating conditions at South Korean manufacturers.

The headline Nikkei Taiwan Manufacturing PMI at 46.9 in September, the headline PMI rose from 46.1 in August, and signalled a further deterioration in operating conditions faced by Taiwanese goods producers. Although the rate of deterioration eased since the previous month, it was nonetheless one of the steepest seen in three years and marked overall.

At 47.4 in September (August: 48.4), the seasonally adjusted Nikkei Indonesia Manufacturing PMI recorded below the crucial 50.0 threshold for the twelfth straight month, and pointed to a continued downturn in the nation’s manufacturing economy.

Pic above: This week Google announced that Huawei, the Chinese electronics giant, will make its flagship smartphone.