China’s manufacturing sector continues decline

Posted on July 1, 2012

China’s Purchasing Managers’ Index fell further in June, recording its weakest reading of the year so far as the country’s manufacturing sector continues to decline.

The official PMI, released by China’s National Bureau of Statistics and China Federation of Logistics and Purchasing, fell to 50.2 in June, from 50.4 in May.

    The index indicated that the country’s manufacturing sector still expanded slightly overall because a reading above 50 points to expansion while a reading below 50 means contraction.

    But sub-indices for new orders and for exports and imports both indicated contraction and harder times to come for a manufacturing sector that has become the world’s workshop in the last decade and a half.

    The sub-index for new export orders fell into contraction territory with a reading of 47.5 in June from May’s 50.4, while the sub-index for overall new orders fell to 49.2 from 49.8 in May.

    The imports sub-index also declined to 46.5 in June from 48.1 in May.

    Continued weakness in China’s manufacturing sector increases the chances that Beijing will introduce fresh measures to boost growth in the coming months.

    Zhou Xiaochuan, Chinese central bank governor, said on Friday the government will fine-tune economic policies in a “timely and appropriate” way while maintaining a “prudent” monetary policy.

    The central bank lowered interest rates in June for the first time in more than three years and has reduced the proportion of deposits that commercial banks must hold in reserve three times starting in November.

    Most analysts now expect further interest rate cuts and a rebound in the economy to begin in the third quarter after six successive quarters of decelerating growth in the world’s second-largest economy.

    China’s gross domestic product grew 8.1 per cent in the first quarter from the same period a year earlier, the slowest pace in nearly three years and the growth rate is expected to have dropped further in the second quarter.

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