The Chinese manufacturing sector remained in contraction for an eighth consecutive month in June, as output, incoming new orders and employment continued to decrease, final results of a survey by Markit Economics and HSBC showed Monday.
The purchasing managers' index, that measures the performance of the manufacturing sector, fell to 48.2 in June from 48.4 in May. The preliminary report showed a reading of 48.1. A PMI reading below 50 suggests contraction.
"It is all about growth and employment. 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, hence weighing on the jobs market," HSBC Chief Economist Hongbin Qu said.
"But as inflation eases sharply, 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," the economist added.
Amid mounting concerns over intensifying crisis in Europe and slowing domestic growth, the People's Bank of China this month lowered its key interest rates, in the first such move since late 2008. China has lowered the reserve requirement ratio in February and May to boost lending.
The HSBC report showed that new orders fell at the greatest extent in seven months, as export orders slumped. Factory output declined marginally in comparison. Meanwhile, input and output costs fell at the sharpest rates in 39 and 42 months, respectively.
China's manufacturing workforce shrank for the fourth month running in June, albeit at only a modest rate that was the weakest in three months.
China's State Council said in May that the economy is currently facing "increasing downward pressure." The Council also said it will accelerate the process of fine-tuning of its policies to achieve more stable growth.
The China Federation of Logistics and Purchasing (CFLP) and the National Bureau of Statistics said Sunday that its purchasing managers' index for the manufacturing sector fell to a 7-month low of 50.2 in June from 50.4 in May. The survey also pointed to decline in new orders and new export orders.
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