China’s factory activity weak in June, but shows signs of stabilising
Orders rise, but firms still cutting jobs as growth in world's second-largest economy slows
China’s factory activity showed some signs of stabilising in June but still contracted for the fourth straight month, according to a preliminary private survey, suggesting more stimulus measures may be needed to support the world’s second-largest economy.
The HSBC/Markit Flash China Manufacturing Purchasing Managers’ Index, or PMI, edged up to 49.6, a three-month high, from 49.2, but remained below the 50 mark which separates contraction from expansion.
New orders returned to positive territory at 50.3 and new export orders fell at a much slower pace, but companies stepped up layoffs, shedding jobs at the fastest pace in over six years, a trend which is sure to alarm Beijing.
Factories were also forced to cut prices for their products more deeply, pressuring profit margins.
“On one hand, the sector shows signs of improvement as output stabilised amid a slight pick up in total new work, while purchasing activity also rose slightly over the month,” said Annabel Fiddes, an economist at Markit.
“On the other hand, manufacturers continued to cut staff. This suggests companies have relatively muted growth expectations and suggests that the authorities may step up their efforts to stimulate growth and job creation in the second half of the year.”
