Chinese factory activity contracted last month for a second straight month, a closely watched private survey showed yesterday, a day after Beijing announced the first official decline in the sector in more than two years.
British banking group HSBC Holdings PLC said its final purchasing managers’ index (PMI) reading for last month edged up to 49.7, from 49.6 in December last year.
However, the result still showed shrinkage in the manufacturing sector of the world’s second-largest economy, a key driver of global growth. PMI readings below 50 indicate contraction, while anything above suggests growth.
The final number was also slightly worse than the preliminary reading of 49.8, HSBC said.
The figure came after an official Chinese survey on Sunday showed manufacturing activity contracting for the first time in more than two years.
China’s official PMI for last month, released by its National Bureau of Statistics, came in at 49.8 last month, down from 50.1 in December. That was the first official contraction reading for 27 months.
“We think demand in the manufacturing sector remains weak and more aggressive monetary and fiscal easing measures will be needed to prevent another sharp slowdown in growth,” HSBC chief economist for China Qu Hongbin (屈宏斌) said in the news release announcing the bank’s figure.
Manufacturing output expanded slightly last month for the first time in three months, HSBC said. While weak demand weighed on growth in new orders domestically and overseas, the bank described the situation as having “broadly stabilized.”
Factory employment also fell for the 15th straight month, HSBC added, though the pace of decline was the slowest in the same period.
“While the PMI readings for January are less downbeat on conditions among small firms, they suggest that momentum has continued to deteriorate among larger firms on the back of softening external demand,” Julian Evans-Pritchard, China economist at Capital Economics, wrote in a report.
While growth in the US, the world’s No. 1 economy, has been a relative bright spot — GDP grew 2.4 percent last year for its best result in four years — other key regions such as Europe and Japan have lagged.
Eurozone economies expanded by a mere 0.2 percent in the July-September quarter of last year — the latest figures available — while Japan, the world’s third-largest economy, slipped into recession in the same period.
GDP in China expanded 7.4 percent last year, slower than the 7.7 percent in 2013 and the worst result since the 3.8 percent recorded in 1990.
“The fall in the official PMI is consistent with our expectations that [first-quarter] growth will likely be weak,” Goldman Sachs economists said in a report. “As the official PMI is viewed as more important by the government, the likelihood of further loosening measures has increased further.”
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