China's manufacturing stalled in September
according to a survey report to which showed a weaker snapshot of the sector
than was suggested by initial estimates.
The Chinese government is due to publish on Tuesday its own
official PMI which reflects big state-owned enterprises compared with the HSBC’s
survey that focuses more on private companies.
After adjusting for seasonal factors, the HSBC Purchasing Managers’ Index (PMI)
– a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy – posted at 50.2 in September, broadly unchanged from 50.1 in August, and signalled that operating conditions improved fractionally since the previous month. Though only slight, this was a positive development, with the PMI signalling a further improvement upon July’s 11- month low.
Output across the Chinese manufacturing sector expanded for the second successive month in September, though the rate of growth slowed to a fractional pace. Furthermore, growth of new work was unchanged from the previous month and only slight.
Nonetheless, new business from overseas increased for the first time in six months (albeit marginally), with panellists citing stronger demand from client bases in Europe and the US. An increased amount of new work led to a further modest increase in purchasing activity at Chinese manufacturers. In contrast, stocks of inputs fell for the eighth month in a row, albeit at the weakest pace in the current sequence of reduction.
The HSBC data shows that stocks of finished goods declined for the third successive month, though only slightly. According to a number of surveyed firms, an increased amount of new business led to the depletion of inventories. Greater volumes of incoming new work led to a modest accumulation of work-in-hand. Backlogs of work have now increased for two successive months. Despite expansions of both output and new work, employment levels continued to decline and at a similar pace to that seen in August.
Stronger demand for production materials led to a renewed deterioration of vendor performance. Though modest, it was the strongest lengthening of lead times since January.
Average production costs increased for the second consecutive month in China’s manufacturing sector. The rate of input price inflation was marked, with nearly 14% of respondents noting increased cost burdens. Higher prices for raw materials such as steel and oil were said to have driven inflation. Firms chose to pass on their higher input prices to clients by raising their output charges for the second month in a row. However, the rate of increase was below-trend and only modest.
Hongbin Qu, chief economist, China & co-head of Asian Economic Research at HSBC
said: “The September HSBC China Manufacturing
PMI edged up slightly from August. New orders remained flat from the previous month, while external demand improved. Manufacturers restocking process continued but remained relatively slow. Growth is bottoming out on Beijing’s mini-stimulus. We expect continuous policy efforts to sustain the recovery"