China PMI figures at 12-month low

More proof of contracting growth on the mainland, but domestic consumption did expand last month to provide bright spot

PUBLISHED : Thursday, 04 October, 2012, 12:00am
UPDATED : Thursday, 04 October, 2012, 3:11am

In another sign that the mainland's economic growth is slowing, its non-manufacturing purchasing managers' index (PMI) came in at 53.7 in September, 2.6 points lower than August and the lowest level for at least the past 12 months, according to official figures published yesterday.

Construction and services (which is part of the non-manufacturing PMI) accounted for 49.9 per cent of the country's gross domestic product (GDP) last year, while manufacturing accounted for 35 per cent, according to Daiwa Capital Markets.

The monthly decline of non-manufacturing PMI in September showed the growth of the mainland's non-manufacturing economy was slowing, mainly due to the softening of the manufacturing-related sector to which services such as shipping were tied, said Cai Jin, deputy chairman of the China Federation of Logistics & Purchasing.

The mainland's logistics index was below 50 points for the second consecutive month in September, while the index of raw materials supply was also below 50 points, reversing two previous months of growth, the federation's website said.

China's manufacturing PMI was 49.8 in September, according to the National Bureau of Statistics. A PMI below 50 indicates economic contraction while above 50 indicates economic expansion.

Normally, China's services sector should be more resilient than its manufacturing sector, because services received government support and were boosted by domestic consumption, said Francis Cheung, CLSA managing director of China-Hong Kong strategy. Hence, the slowdown in services was not a good sign, Cheung warned.

"China's economy is still slowing into the third quarter. It will continue to slow. The question is whether the Chinese government will put a floor to the slowdown in the fourth quarter," Cheung said.

So far, the central government's efforts to stimulate the economy had been half-hearted, possibly because of the ongoing leadership change, he added. "They should be more proactive about managing the economy."

The mainland's property services index was 48.3 points in September, 3.2 lower than August, according to the federation's website. On a brighter note, mainland domestic consumption was vibrant, with the retail index rising to 60 points in September and expected to remain high in October, said the federation's website.

Taking an optimistic view, a Daiwa Capital Markets report said, "The non-manufacturing PMI in September confirmed strong business activity in China's service and construction sectors. With 50 per cent of China's economy still in expansion, we see real GDP growth for the third quarter remaining close to the 7.6 per cent year-on-year gain in the second quarter."