Manufacturing activity drops to 10-month low
May 30, 2011 Category Macro-economy, Weekly
Manufacturing activities may ease for a second month in May, according to a preliminary reading of the HSBC Purchasing Managers’ Index, which stands at 51.1 for May, a 10-month low and down from April’s 51.8. “Manufacturers continued to reduce inventories amidst slowing new business flows, leading to slower production growth at a 10-month low,” said Qu Hongbin, Chief Economist for China at HSBC. “But we think there is no need to worry about a hard landing because the current level of the PMI is still consistent with around 13% industrial production growth and 9% gross domestic product (GDP) growth,” he added. Qu said the policy focus should still be on taming inflation, and he expected China’s tightening policies to continue. To curb inflation, China has lifted interest rates twice this year, together with five hikes of the reserve requirement ratio (RRR) that forced banks to set aside more money as reserves. Industrial production gained 13.4% annually in April, 1.4 percentage points lower than in March.
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