* China official PMI slips to 50.1, eight-month low
* China HSBC PMI rises, but remains below 50
* New orders and new export orders point weak
* Adds to recent evidence that Asian exporters struggling
By Lucy Hornby
BEIJING, Aug 1 Asia's powerhouse manufacturing
centres suffered weak export orders and declining output in
July, surveys of purchasing managers showed on Wednesday, as
misery wrought by the euro zone debt crisis poured pessimism
over the region.
Global markets have been filled with doubt this week over
whether the U.S. Federal Reserve and the European Central Bank,
meeting later on Wednesday and Thursday respectively, will or
can do enough to lift the world economy.
Although the Fed's forecasts of 1.9-2.4 percent growth for
the U.S. economy this year look increasingly unrealistic, the
central bank is expected to leave interest rates steady when it
meets later, and there is uncertainty over what the ECB can do
to ease the protracted debt crisis.
Disappointment over sentiment surveys in China added to the
engulfing gloom for investors.
China's official factory purchasing managers' index fell to
an eight-month low of 50.1 in July from 50.2 in June.
At least the overall index held the right side of 50, the
line dividing expansion from contraction, thanks to an output
sub-index that suffered only a slight slip to 51.8 from 52.0.
"This is not the bump that the authorities are looking for.
But, the good news is that things are not getting significantly
worse," IHS Global Insight economists told clients in a note.
The HSBC China PMI, also published on Wednesday, rose to a
seasonally adjusted 49.3, its highest level since February, but
July marked the ninth straight month that the private-sector PMI
was below 50, indicating contraction.
Analysts drew some comfort from the slight improvement in
the HSBC PMI, which focuses on smaller private enterprises in
contrast to the official PMI that primarily covers the big state
"The Chinese manufacturing data clearly highlights the soft
landing that is taking place across mainland China. The low
inflation environment should allow Chinese authorities to
provide further stimulus in coming months," said Craig James,
economist at Commsec in Sydney.
But the good news pretty well stopped there, with 10 of
China's 11 major sub-indexes in the official PMI locked under
50, showing just how much the economy is struggling to revive
its momentum, with little evidence of measures aimed at boosting
domestic demand taking quick effect.
The weakness of new export orders, at 46.6 in China official
PMI, was a common trait in Asia.
Manufacturing activity in South Korea shrank the most in
seven months, according to a HSBC/Markit survey, with the
purchasing managers' index dropping to 47.2.
South Korea's new export orders at 48.59 in July were
slightly better than in June, but hardly heartening, while
Taiwan's fell at their fastest pace since December.
As if to underscore the gloom for exporters, official Korean
data on Wednesday showed exports in July fell the most in nearly
Korea also released data on Tuesday showing industrial
output fell four times more than expected, and Taiwan lopped a
full percentage point off its forecast for economic growth this
Those findings reinforced the message of a PMI survey
released in Japan on Tuesday, which showed the factory sector
shrinking at its fastest pace since last year's earthquake.
The slump reflects, in large degree, the sad state of Asia's
European and American customers, though falling import demand in
China was a factor for some.
The manufacturing PMI for the euro zone due to be released
later on Wednesday is expected to show the region locked deep in
a contractionary phase, with a Reuters poll forecasting an index
at 44.1 for July.
In the United States, the Institute of Supply Management is
expected to report later on Wednesday that its gauge popped back
up above 50 in July after slipping to 49.7 in June on a slump in
In a further worrying sign for Asia, PMI employment
sub-indexes in China, South Korea and Taiwan all pointed to
contraction. So far in the current downturn, Asia has yet to see
a repeat of the heavy job losses suffered in the 2008/09 global
The coming months are a sensitive time for China with a
leadership succession looming later this year for the ruling
President Hu Jintao was quoted on Tuesday saying fiscal and
monetary policy support for the economy would be stepped up in
the second half, while Premier Wen Jiabao spoke of policy fine
tuning and signs that the economy was stabilising, after growth
slowed to its slowest pace in more than three years in the
India, Asia's third-largest economy, is saddled with
multiple problems, including the growing probability of a
drought wrecking the farm sector, and factories grinding to a
halt amid a spate of wide scale power outages.
The situation has not been helped by doubts over the Indian
government's ability to push through reforms, while its central
bank has ignored calls for interest rate cuts, saying that the
government needs to reduce its fiscal deficit first.
Those worries were all clearly manifest in a survey that
showed shrinking export orders and sluggish output reduced
manufacturing growth to its slowest pace since November.
The HSBC manufacturing PMI fell to 52.9 in July from 55.0 in
June, its biggest one-month drop since September last year.
Like elsewhere, new export orders formed a black spot,
slumping to 49.7 in July from 52.3 in June.
A top policy adviser to the government on Tuesday raised the
probability that growth this fiscal year will match or fall
below the 6.5 percent growth in 2011/12 -- its slowest rate of
growth in nine years.