Chinese manufacturing declines in August

Associated Press

BEIJING (AP) — Chinese manufacturing activity contracted in August as new orders fell, but the slowdown shows signs of bottoming out, an industry group said Saturday.

The report by the state-authorized China Federation of Logistics and Purchasing added to mixed signals about whether China is starting to recover from its deepest economic downturn since the 2008 global crisis. The slump comes at a sensitive time for the Communist Party, which is preparing to hand power to younger leaders this year.

The federation said its purchasing managers index fell to 49.2 in August from July's 50.1 on a 100-point scale on which numbers below 50 show a contraction. It was the group's weakest reading to date.

"It shows the economy is moving downward, but is bottoming out considering changes in the major sub-indexes," the report said.

Analyst Zhang Liqun said government policies were taking effect, with domestic investment and consumption growing steadily since June.

China's economic growth fell to a three-year low of 7.6 percent in the quarter ending in June, and corporate profits and other indicators have fallen despite government stimulus measures.

Analysts expect an economic recovery late this year or early in 2013 but say it will be too weak to drive global growth without improvement in the United States and Europe.

A preliminary version of a separate PMI by HSBC Corp. also showed August manufacturing weakening, falling to 47.8 points from July's 49.3.

The logistic federation's survey showed all indexes — except for manufacturing — were either at or below 50.

The new order index was 48.7, down 0.3 point from July. The new export order index remained at 46.6, the same as in July.

The Cabinet minister in charge of China's planning agency said this week that growth was "stabilizing at a slow pace," but gave no details or a time frame for a recovery.

Beijing has cut interest rates twice since June 1 and is pumping money into the economy by encouraging investment by state companies. But authorities are moving cautiously after China's huge stimulus in response to the 2008 crisis fueled inflation and a wasteful building boom.

View Comments