HSBC Final Manufacturing PMI Confirms a Contraction in China

by on January 30, 2014 2:40 am BST

The HSBC final manufacturing PMI confirms the flash PMI data earlier this month, China’s manufacturing sector is contracting. As emerging markets become more volatile, market participants will be deciding the systemic risks from the second-largest global economy slowing down future.

The purchasing manager’s index (PMI) contracted below the pivotal 50 threshold which is the thin line from expansion and contraction. The manufacturing PMI in December fell to 49.5 from 50.5, according to data from HSBC Holdings PLC and Markit Economics. Analysts were only slightly off with an estimate of 49.6 percent.

Currently in a growing credit crisis, China’s growth is in serious jeopardy as global growth remains sluggish. Premier Li Kegiang has said that employment could come under pressure if gross domestic product falls .3-.5 percent from current levels.

Yao Wei, an economist focusing on China for Societe Generale, said “policy makers will soon have to decide how much short-term slowdown they are willing to tolerate in exchange for a more efficient economic system.” This is an economic trade-off and it will likely cause further market volatility until expectations become for realistic.

The state-released PMI data,  issued by the National Bureau of Statistics and China Federation of Logistics and Purchasing, will like show a higher reading of 50.5, a six-month low.

The Australian and New Zealand dollars accelerated losses on the report, both reaching declines of one percent. China is Australia’s largest trading partner.