Chinese manufacturing and export orders continued to fall in May, and the deceleration is expected to continue for at least the next several months, according to the results of a monthly survey by banking giant HSBC Holdings plc .
Manufacturing conditions have deteriorated in China over the last seven months as demand from Europe withered in the face of continued economic weakness in Europe and fiscal debt-related crisis at several of the region's leading economies. Exports into the United States have also come under pressure in recent months, pushing down the HSBC Flash Manufacturing Purchasing Managers' Index (PMI) to a seven-month low. In June, new export orders decelerated at the fastest pace since March 2009, HSBC said.
"China's manufacturing sector continued to slow in June, though the pace of slowdown seems to be slowing," said Hongbin Qu, chief economist, China, and co-head of Asian Economic Research at HSBC, in a statement.
"With external headwinds remaining strong, exports are likely to decelerate in the coming months. The sharp fall of prices and moderation of new orders suggest weak domestic demand, posing destocking pressures for Chinese manufacturers. All will likely weigh on the jobs market. As such, we expect more decisive policy stimulus to reverse the growth slowdown."
HSBC said new orders, new export orders, and output are contracting at a "faster rate," while other segments of the PMI, including stocks of purchases, quantity of purchases, and employment are contracting at a "slower rate."
The Flash China PMI is based on 85 percent to 90 percent of survey responses from more than 420 manufacturing companies. HSBC conducts the survey in conjunction with Markit, a global financial services company.