HSBC Flash PMI shows factories may cool to 7-month low

08:25, February 22, 2011      

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China's manufacturing activities may cool to a seven-month low in February amid tightening measures and seasonal changes, a survey showed yesterday.

The HSBC Flash China Manufacturing Purchasing Managers' Index, a newly launched indicator to measure industrial activities across the country, stood at 51.5 this month, down from the final HSBC PMI of 54.5 in January.

France, Germany and the eurozone also publish the flash PMI.

The bank started this month to publish the flash China PMI data on a monthly basis about one week before the final PMI. It is based on more than 85 percent of total PMI survey responses and provides an indication of the final PMI data.

"The Spring Festival holiday may be a factor but not the only reason," said Qu Hongbin, chief economist at HSBC. "It also implies that quantitative tightening has started to filter through, yet more still needs to be done to check inflation."

Under a tighter monetary policy, the component indices of output and new orders under the HSBC flash PMI showed a slower rate of expansion, while new export orders and employment contracted. Also, manufacturers reported higher production costs as the flash data showed a faster rate rise in both input and output prices this month.

The central bank ordered banks to put aside more money as reserves last Friday to tame price rises and possible asset bubbles. It was the second move within a month and 10 days after an interest rate increase.

China's Producer Price Index, the factory-gate gauge of inflation, grew 6.6 percent from a year earlier in January, also up from December's 5.9 percent, according to the National Bureau of Statistics.

Source: Shanghai Daily
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