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China’s Caixin manufacturing PMI hit 14-month low

China’s caixin manufacturing purchase managers’ index edged down to 50.6 in August, the lowest in 14 months, compared to 50.8 in the previous month.

Official manufacturing PMI data released on Friday showed that the country’s manufacturing PMI grew to 51.3 in August, compared to 51.2 in the previous month.

Official manufacturing PMI primarily tracks big-sized companies, in particular state-ownd enterprises, while caixin manufacturing PMI reflects factory activities at mid- and small-sized companies.

The caixin data shows that manufacturing costs grew at the fastest pace in seven months, due to surging prices of raw materials. Meanwhile, the reading for new orders recorded the slowest growth in 15 months and export sales declined for the 5th straight months.

In addition, manufacturing companies’ new hiring went deeper in the contracting zone.

The manufacturing sector saw a significant contraction in the demand side while activities in the supply side were relatively stable and manufacturing companies’ hiring activities showed a further slowdown, said Zhong Zhengsheng, chief economist at CEBM, a Beijing consultancy.

Dragged by contracting demand, current activities in the supply side will not be sustainable and slowing hiring will put more pressure on consumption and economic growth, said Zhong.

The gloomy picture is highlighted by a contraction of factory activities in souther Guangdong province, one of China’s economic powerhouse.

Its official manifacturing PMI for the province came in at 49.3 in August, falling into contraction territory for the first time since March 2016, 0.9 percentage point lower than the previous month and 1.6 percentage point down from a year earlier.

In particular, the readings for production activity was down sharply in August, falling 1.5 percentage points from a month earlier to the lowest in nearly 30 months.

The reading for new orders fell 1.7 percentage points from last month, after 1.8 percentage point drop in July, slipping into the under-50 territory for the first time in 30 months.

Dragged by contracting new orders, companies saw rising inventories and slowing new hiring, shows the  data.

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