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China's August Manufacturing Slips To Five-Month Low

The CLSA China manufacturing purchasing managers' index (PMI) slipped in August to a five-month low of 52.6 points, a figure that still indicates expansion, a statement said Sept. 1. The PMI, an indicator designed to provide a snapshot of the health of the Chinese manufacturing sector, was down from a 14-month high of 53 in July, CLSA said.

An index reading below 50 indicates the manufacturing economy is shrinking while above 50 suggests expansion.

"The expansion in the manufacturing sector remains solid although not reflective of the breakneck pace of GDP growth," CLSA chief economist Jim Walker said in the statement. "This suggests that most of the re-acceleration in the Chinese economy in 2006 has come in the real estate and infrastructure sectors."

China's gross domestic product expanded 10.9% in the first half of the year.

However, expansion of new business reflects a softening of demand from both domestic and export clients. "The number of respondents reporting higher new export orders has dropped to the lowest level since the survey began in April 2004," Walker said, adding a slowing U.S. economy would impact on China. We expect to see much more weakness here over the coming year as the U.S. economy slows sharply."

Purchasing activity continued to grow as companies attempted to satisfy higher output needs and build stocks for future production. Suppliers' delivery times lengthened on average for the seventh consecutive month, CLSA said.

The data also indicated a further marked increase in input costs, with oil, aluminum, copper and chemicals reported to have risen in price since July.

Firms raised staff levels in August for the fifth month running in response to increased workloads.

Copyright Agence France-Presse, 2006

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