Chinw Watch Blog has learnt that China’s new export orders shrank in February the most in eight months, a preliminary HSBC business survey shows, defying expectations of a pick up after Lunar New Year holidays and a worrying sign of the impact of the euro area debt crisis.
A local newspaper reported that many analysts had expected some rebound in February after imports and exports fell the most in two years in January, when factories closed for several weeks for Lunar New Year holidays.
But HSBC’s February flash PMI, which showed the overall manufacturing sector shrinking for the fourth-straight month, suggested overseas demand was sliding even further.
“This suggests trade may continue to be disappointing and we cannot see any improvement in the near term,” Kevin Lai, senior economist at Daiwa Capital Markets in Hong Kong, was quoted as saying.
HSBC flash PMI, the earliest indicator of China’s industrial activity, rose to a four-month-high at 49.7 in February from 48.8 in January. The PMI has been below 50, which demarcates expansion from contraction, for most of the last eight months.
The new export orders sub-index dropped to 47.4 — the lowest in eight months — from 50.4 in January as the European debt crisis cast a shadow over Chinese exports. Overall new orders were flat at 49.1, a level that indicates they were falling.
An output sub-index rose to 50.1 in February from 47.6 in January.
HSBC said the data, based on 85-90 percent of responses to a monthly survey, suggested further policy easing was needed. The final PMI is subject to revision and will be released March 1.
“Growth remains on track for a slowdown, despite the marginal improvement in the headline flash PMI led by quickened production after the Chinese New Year,” said Qu Hongbin, HSBC’s chief economist for China.
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