Chinese Manufacturing Output Shrank in September

Sept. 23, 2011
Purchasing managers index falls to a two-month low, but concerns of a hard landing in China are 'unwarranted.'

Manufacturing activity in China contracted for the third straight month in September, early data released Thursday showed, as turbulence in the United States and Europe hurt demand for exports.

The HSBC preliminary purchasing managers index (PMI) fell to a two-month low of 49.4 in September from a final reading of 49.9 in August, the British banking firm said in a statement.

A reading above 50 indicates the sector is expanding, while a reading below 50 suggests contraction. The gauge stood at 49.3 in July, which was the lowest level in 28 months and the first contraction in a year.

New export orders contracted at a faster pace in September than in August, HSBC said, amid deepening economic woes in the United States and Europe -- key buyers of Chinese-made products.

But despite the deterioration in the manufacturing sector, which employs millions of people and is a major driver of growth, HSBC chief economist Qu Hongbin said concerns of a hard landing in China are "unwarranted."

"Resilient domestic demand is sufficient to support around 8.5% to 9% growth in the coming quarters," Qu said in the statement.

China's economy expanded 9.5% year-on-year in the second quarter of this year, slower than the 9.7% posted in the first quarter and 9.8% in the fourth quarter of 2010.

The PMI figures also showed input prices -- a measure of the cost of raw materials -- rose at a faster pace this month, complicating Beijing's efforts to rein in inflation in the world's second-largest economy.

The September reading is subject to revision when the bank publishes its final figures on Sept. 30.

Copyright Agence France-Presse, 2011

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