Chinese economic concerns have come to the fore yet again today with the latest Nikkei-Markit PMI gauge for Hong Kong slumping to a fresh multi year low.
The gauge, a measure on private sector business conditions in Hong Kong, dropped to 44.4 in August, the lowest level seen since April 2009.
A figure below 50 indicates that activity across private sector firms is contracting, so 44.4 is horrible.
The synopsis below, provided by Markit, makes for some dire reading:
“The downturn in Hong Kong’s private sector economy intensified in August, with the PMI falling to its lowest reading since early-2009. Latest data pointed to the sharpest contractions of output and new orders for over six years, which led companies to reduce their workforce numbers at the quickest rate since April 2003. Weaker client demand also contributed to a sharper decline in purchasing activity while destocking activities persisted. On the prices front, total input prices fell for the second month in a row and output charges declined at the quickest rate since April”.
Not only is activity already contracting at an alarming rate, based on the decline in new orders recorded in August – an indicator on potential future activity – it may be about to get a whole lot worse.
“A further drop in total new business placed at Hong Kong private sector companies was seen in August. Moreover, the rate of contraction quickened to the steepest recorded in 75 months. According to anecdotal evidence, weaker economic conditions had weighed on client demand in the latest survey period, while some firms also commented that fewer tourists had reduced new orders. New business from Mainland China also fell markedly on the month, with the latest reduction the sharpest since December 2008″.
New orders declined at the fastest pace in 75 months, with those from mainland China collapsing to the lowest level seen since December 2008, the height of the global economic crisis.
Despite this gauge being for Hong Kong and not China, given the special administrative zone’s economic fortunes are largely pinned to those on the mainland, it suggests China’s economy is not in a healthy state at present.
While one month does not make a trend, the Hong Kong PMI has been deteriorating constantly since the beginning of the year, culminating in the ugly August reading.
Coupled with horrible Taiwan and South Korean manufacturing PMI’s released earlier this week, two nations heavily reliant upon China for driving their own economic performance, anecdotal evidence is growing to suggest China’s economy is in a far worse state that what many currently suggest.
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