by ohanian » Wed 19 Jun 2013, 22:08:23
Hot off the press
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11:42am: HSBC’s flash manufacturing PMI for China is out in a couple of minutes. The data will give some insight into the country’s industrial production and may move the local market if it comes in off target (expected is a reading of 49.1, slightly down from last month’s 49.2).
Incidentally, HSBC overnight cut its GDP forecasts for China to 7.4% (from 8.2%) for this year and 2014 (from 8.4%). Growth should rebound in 2015. The banks said:
Three months into the job Beijing's new leaders are clearly determined to use the reform process rather than stimulus to sustain growth.
The reform agenda includes financial, fiscal, deregulation, and urbanisation reforms. Once implemented, these measures should invigorate the private sector and improve efficiency, lifting growth prospects in the medium to long term.
That said, it will take time for these measures to filter through to the economy and have an impact on growth. In the short term some reform initiatives will actually be negative for demand, implying that growth will slow before regaining momentum in 2015.
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Some more details on the Chinese data showing activity in the country's vast manufacturing sector weakened further in June to a 9-month low, reinforcing signs of tepid economic growth in the second quarter.
The flash HSBC Purchasing Managers' Index fell to 48.3 in June from May's final reading of 49.2, drifting further away from the 50-point level demarcating quickening growth from slowing. It was the weakest level since September.
"Manufacturing sectors are weighed down by deteriorating external demand, moderating domestic demand and rising destocking pressures," says Qu Hongbin, chief China economist at HSBC. "Beijing prefers to use reforms rather than stimulus to sustain growth. While reforms can boost long-term growth prospects, they will have a limited impact in the short term. As such we expect slightly weaker growth in 2Q."
A sub-index measuring overall new orders dropped to 47.1 in June, the lowest reading in 10 months, suggesting demand is weakening both at home and abroad.
The survey, compiled by British-based Markit Group Ltd, showed new export orders weakened further in June, pointing to persistent global headwinds as the US recovery remains patchy while Europe's economy remains shackled by the debt crisis.