June PMI signals weakness

A worker assembles a tunneling machine at a China Railway Equipment Manufacturing Co Ltd plant in Zhengzhou, Henan province. Deteriorating external demand and moderating domestic demand have dragged down the country's factory activities in May, according to HSBC. ZHANG YUPENG / FOR CHINA DAILY

Slack external and domestic demand blamed

China's manufacturing production may have dropped to a nine-month low in June, adding further headwinds to the country's economic progress in the second half of this year, figures from HSBC said on Thursday.

The flash estimate of the HSBC China Purchasing Managers' Index fell to 48.3, worse than the final reading of 49.2 in May. It is also the third consecutive monthly decline and hitting its weakest level since September, according to HSBC Holdings PLC.

A reading below 50 signals contraction.

The reduction means an accelerated contraction of the country's manufacturing sector, economists said.

Qu Hongbin, HSBC's chief economist in China and the co-head of Asian Economic Research at the bank, blamed deteriorating external demand, moderating domestic demand and rising destocking pressures for dragging down the latest reading.

In June, manufacturing output showed by a sub-index of PMI retreated to an eight-month low of 48.8, down from 50.7 in May.

New orders shrank at the fastest speed in 10 months, suggested by a reading of 47.1, compared with 48.7 a month earlier.

The HSBC figures also showed that in June, the PMI sub-index of employment continued to fall, to 47.9 from 48.6 in May, the lowest level in 10 months, and marking a fifth consecutive monthly drop.

Zheng Shili, general manager of Wenzhou Golden Emperor Shoes Co Ltd in Zhejiang province, said that most shoe manufacturers in the city were struggling to make a profit.

"Overseas orders have continued to decline as consumer demand remains severely affected by the slow economic recovery in most European countries," said Zheng.

Orders for leather shoes dropped about 30 percent in May compared to the same period two years ago.