Not-so achche din in China as factory output falls again

  • Reuters, Beijing
  • Updated: Sep 01, 2014 13:33 IST

An index of growth in China's vast manufacturing sector fell from a 27-month high to 51.1 in August, a government study showed on Monday, slightly less than forecast and adding to signs of growing softness in the Chinese economy.

China's official Purchasing Managers' Index (PMI) slipped in August from July's 51.7, the National Bureau of Statistics said, slightly missing the median forecast of 51.2 in a Reuters poll.

A breakdown of the survey showed output, employment, new orders, delivery time and raw material inventory all fell across the board, with the labour market showing the most weakness.

The fall comes at a time when India's GDP output hit a high of 5.7% on the back of improved industrial output.

Read: Economy grows 5.7%, clocks fastest growth in 2 yrs

The employment sub-index slipped to a three-month low of 48.2 in August, below the 50-point mark that separates growth in activity from a contraction. An output sub-index slipped to 53.2 from July's 54.2, while new orders fell to 52.5 from July's 53.6.

The broad retreat across all sub-indices underscores rising concerns that the world's second-largest economy may be stumbling again. The economy has had a rocky spell this year. Growth sank to an 18-month low of 7.4 percent in the first quarter before edging up to 7.5 between April and June.

Hopes that the mild rebound may gain traction were battered last month when growth in retail sales and fixed asset investment slowed, while money injected into the economy unexpectedly tumbled to a near six-year low.

Cooling activity has hurt factories across China. More Chinese manufacturers are falling behind on their payments as economic growth falters, causing accounts receivable to spike 1.1 trillion yuan ($179 billion) in the first six months from the year-ago period, the government said last month.

But Zhao Qinghe, a senior statistician at the National Bureau of Statistics, cautioned against an overly pessimistic response to Monday's official reading on manufacturing activity.

Although the PMI retreated in August from July, it is still the second-highest reading struck this year, Zhao said.

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