PMI forecast signals economic contraction

A preliminary reading showed the HSBC Purchasing Manager’s Index fell to a two-month low of 49.4 in September from a final reading of 49.9 in August, signaling that China’s manufacturing sector has contracted for the third consecutive month, state media reported. A reading above 50 indicates manufacturing activity has expanded, while one below 50 indicates contraction. New export orders contracted more quickly in September than August, as economic uncertainty wracked China’s major export markets in the US and EU. The data align with the outlook of the International Monetary Fund (IMF) and the Asian Development Bank (ADB), which have both lowered their estimate for China’s 2011 and 2012 economic growth due to domestic tightening and a sluggish outlook for the global economy. However, HSBC said the contraction was at a fractional rate, suggesting China’s economy is not yet headed for a hard landing.