China Purchasing Managers' Index At New Low

A leading index showed on Nov. 1, the pace of growth of manufacturing production in China rose in October but only marginally due to weak demand and oversupply in some sectors. Hong Kong-based brokerage CLSA said its China Purchasing Managers' Index fell to its lowest level in the indicator's short history last month, coming in at 50.1%, a 19-month low, compared with September's 50.9%.

This leaves it lying just above the line distinguishing improving conditions for manufacturers from deterioration. It compares to China's official purchasing managers' index, also released Nov. 1, which fell to 54.1% in October from 55.1% in September.

"Orders, from both China and overseas are slowing and, as manufacturers are having to keep tight control of product inventory, this is resulting in a sharp slowdown in production growth," CLSA deputy chief economist Eric Fishwick said.

With only modest gains recorded, manufacturers were reluctant to hire last month. Only 3% of firms surveyed added to their payrolls and the employment component of the index recorded its third contraction in a row.

CLSA said that its latest index also suggested that profit margins were shrinking with input prices rising and output prices falling while cost inflation -- due in large part to oil prices -- remained strong.

Copyright Agence France-Presse, 2005

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