China March flash HSBC PMI contracts to 11-month low, new orders drop

[BEIJING] Activity in China's factory sector dipped to a 11-month low in March as new orders shrank, a private survey showed, signalling persistent weakness in the world's second-largest economy that will likely add to calls for more policy easing.

The flash HSBC/Markit Purchasing Managers' Index (PMI) dipped to 49.2 in March, below the 50-point level that separates growth in activity from a contraction on a monthly basis.

Economists polled by Reuters had forecast a reading of 50.6, slightly weaker than February's final PMI of 50.7. "A renewed fall in total new business contributed to a weaker expansion of output, while companies continued to trim their workforce numbers," said Annabel Fiddes, an economist at Markit said. "Manufacturing companies continued to benefit from falling input costs, stemming from the recent global oil price decline. However, relatively muted client demand has led firms to pass on savings in a bid to boost new work, and cut their selling prices at a similarly sharp rate." The survey suggested that manufacturers faced considerable headwinds from weaker domestic demand and deflationary risks.

The new orders sub-index fell to a 11-month low of 49.3, although new export orders contracted at a slower pace. The employment sub-index hit its lowest since the height of the global financial crisis.

Weighed down by a cooling property market, industrial overcapacity and local debt, China's economy grew 7.4 per cent in 2014, its slowest expansion in 24 years. Economists expect growth to cool further to 7 per cent in 2015, even with additional stimulus measures.

The central bank has cut interest rates twice since November and lowered bank's reserve requirement ratios, on top of a raft of other monetary and fiscal measures in 2014. More such moves are expected in coming months.

REUTERS