Tue, Jul 03, 2012 - Page 15 News List

China’s PMI contracts, while India’s edges up: HSBC

AFP, SHANGHAI and MUMBAI

China’s manufacturing activity contracted for the eighth consecutive month last month, while India’s expanded to a four-month high, British bank HSBC said yesterday.

The bank’s purchasing managers’ index (PMI) for China fell to 48.2 from 48.4 in May, the bank said, adding that it could prompt more government moves to boost the flagging economy.

A PMI reading above 50 indicates expansion, while a reading below 50 points to contraction.

A preliminary reading for last month was 48.1.

China’s official PMI has painted a slightly better picture of the economy.

PMI fell to a seven-month low of 50.2 last month, industry group the China Federation of Logistics and Purchasing said on Sunday. Analysts say the divergence in the PMI measures is caused by HSBC giving more weighting to small firms, which have suffered more than state-owned giants in the current economic downturn.

The weaker manufacturing came despite a rate cut last month.

The government has been trying to avert a hard landing for the world’s No. 2 economy, which has been hit by weakness in key export markets such as the US and Europe.

China’s economy grew an annual 8.1 percent in the first quarter of the year — its slowest pace in nearly three years. The government will release the GDP figure for the second quarter next week.

“As external demand has weakened and domestic demand hasn’t shown a meaningful improvement in response to earlier easing measures, growth is likely to be on track for further slowdown,” HSBC’s co-head of Asian economic research, Qu Hongbin (屈宏斌), said in a statement.

HSBC forecast GDP growth could slow to 7.8 percent in the second quarter, before rebounding later this year.

“Beijing has plenty of room and policy ammunition to avoid a hard landing. We expect more decisive easing efforts to come through in the coming months,” Qu said.

Meanwhile, India’s PMI rose marginally to 55 last month from 54.8 in May, HSBC said, indicating an improvement in business conditions despite widespread concern over the nation’s economy.

The data comes amid global ratings agencies’ warning that they might downgrade India’s debt to junk status, with the economy reeling from gaping fiscal and current account deficits, strong inflation and a weak currency.

While business conditions improved, costs rose at a faster pace last month than in May, which meant inflation remained high, HSBC said in a statement.

“The Reserve Bank of India (RBI) does not have a strong case for further rate cuts, which could add to lingering inflation risks,” HSBC’s chief India economist Leif Eskesen said.

The RBI kept interest rates unchanged last month after it had cut rates in April — its first in three years — after hiking borrowing costs 13 times since March 2010.

Inflation has now fallen to just under 7 percent, while the rupee has lost more than a quarter of its value against the US dollar over the last 12 months to hit record lows.

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