Drop in HSBC manufacturing index indicates weak China recovery


China’s manufacturing output has hit a two-month low and raised concerns that the recovery of the world’s second largest economy will not be as strong as hoped.

As The Australian reports, the HSBC flash Purchasing Managers Index, a measure of China’s economic activity was released yesterday. The index came in at 50.5, down from 51.6 last month.

Any figure over 50 shows that manufacturing output is expanding; however economists were hoping for a figure above 51.5 this month.

The result suggests that China’s manufacturing sector is not recovering as strongly as was expected.

Qu Hongbin, HSBC's chief China economist, confirmed this.

"The net export orders contracted after a temporary rebound in March, which suggests external demand for China's exporters is weak," Qu said.

"The weaker overall demand has started to weigh on unemployment in the manufacturing sector. Beijing is expected to respond strongly to sustain external demand by increasing their efforts to boost domestic investment and consumption in the coming months."

The Chinese economy grew by 7.7 per cent in the first quarter. This was below the expected figure of 8 per cent. It is targeting growth of at least 7.5 per cent for this year.

This result for the HSBC flash Purchasing Managers Index, combined with results from a number of business surveys through Asia, Europe, and North America have raised concerns about the overall strength of the global economy.