China's July PMI to fall to 28-month low: HSBC

09:03, July 22, 2011      

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Growth in China's manufacturing sector is likely to hit a 28-month low this month, global banking company HSBC said on Thursday.

HSBC said that its preliminary purchasing managers index (PMI) fall to 48.9 percent in July, down 1.2 percentage points from June's index of 50.1 percent.

A reading above 50 percent indicates economic expansion, while a reading below 50 percent indicates contraction. This month's reading marks the first time for the index to drop below 50 percent since July 2010, HSBC said.

China's official PMI data, compiled by the China Federation of Logistics and Purchasing (CFLP), shows that the index has fallen for three consecutive months. The index has been falling amid the government's efforts to contain inflation by withdrawing liquidity from the market.

Qu Hongbin, HSBC's chief China economist, said he expects industrial growth to decelerate in future months, as government tightening measures will continue to have an effect on the sector.

However, strong growth in domestic spending and infrastructure investment will keep the country's economic growth around nine percent for the full year, he said.

China's gross domestic product (GDP) rose by 9.5 percent year-on-year in the second quarter of 2011, tapering off slightly from the 9.7-percent growth posted in the first quarter.

Meanwhile, China's consumer price index (CPI), a main gauge of inflation, rose 5.4 percent year-on-year in the first half, exceeding the government's target ceiling of 4 percent for this year.

Both the CFLP and HSBC will release their final PMI readings on August 1.

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