Latest survey data indicated that operating conditions faced by Chinese manufacturers continued to deteriorate in June, albeit at a weaker rate. Total new orders rose for the first time in four months, though only slightly, while output contracted at a weaker pace than in May. However, manufacturers continued to cut their
workforce numbers in June, with the latest reduction the strongest seen since February 2009. On the costs front, average input prices fell at a modest rate that was the slowest since last August, while companies discounted their selling prices for the eleventh successive month.
Adjusted for seasonal factors, the HSBC Purchasing Managers’ Index™ (PMI™) posted at 49.4 in June. This was the fourth successive month that the PMI has registered a level in contractionary territory. However, the latest reading was up from 49.2 in May, and signalled a marginal rate of deterioration that was the slowest since March.
Manufacturers in China signalled a tentative improvement in overall demand conditions at the end of the second quarter. This was highlighted by a renewed
expansion in total new business placed at goods producers in June, with new work from abroad also rising on the month. That said, the rate of growth was
only slight in both cases. Meanwhile, relatively subdued market conditions led companies to cut their production for the second month running. However, the rate of contraction eased since May and was fractional. Consequently, firms depleted their stocks of finished goods at a faster rate in order to fulfil new and current orders.
Chinese manufacturing employment declined for the twentieth consecutive month in June. Furthermore, the pace of job shedding accelerated to the fastest seen
since February 2009. Reports from panellists suggested that staff numbers fell due to the implementation of cost-reduction policies. Reduced payroll numbers and a slight upturn in new work contributed to a second monthly accumulation in the level of work-in-hand.
Higher new business meanwhile led to increased purchasing activity in June. Although the rate of expansion was marginal, it was the first time that input buying has risen since March. The latest survey pointed to a further easing in the rate of input price deflation during June, with average input costs declining at the slowest pace since last August.