China’s August PMI plunges to 50.2 from July’s 18-month high: HSBC

Client demand softened both at home and abroad.

China’s Purchasing Managers’ Index plunged from July’s 18-month high in August. This month’s PMI registered at 50.2, down from 51.7 in July.

According to HSBC, this signalled only a fractional pace of improvement that was the weakest in three months.

“The decline in the headline index partly reflected slower expansions of both output and total new business
during August. The rates of production and new order growth were moderate overall, having eased from 16-
month highs in July,” noted HSBC.

“Data suggested that client demand softened both at home and abroad, as new export work also rose at a weaker pace in August. While some panellists mentioned that improving market conditions and new client wins boosted new work intakes, others commented on relatively subdued client demand,” the report added.

According to Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC, “The HSBC China Manufacturing PMI eased slightly to 50.2 in the final reading for August from the flash reading of 50.3. The revisions were mixed, with upward  revision to the new export orders and output sub-indices but downward revisions to the employment and input prices indices.

Although external demand showed improvement, domestic demand looked more subdued. Overall, the manufacturing sector still expanded in August, but at a slower pace compared to previous months. We think the economy still faces considerable downside risks to growth in the second half of the year, which warrant further policy easing to ensure a steady growth recovery.”