China’s manufacturing sector slowed to an 8-month low last month (February), adding to the fears of a slowdown in the economy as demand weakens.
The Purchasing Mangers’ Index (PMI) is an international performance index which was used to quantify China’s recent dip in performance. As a gauge of manufacturing sector’s economic health, the PMI is bases around five major indicators such as inventory levels and supplier deliveries (Investopedia). PMI readings greater than 50 represents an expansion of the sector, whereas readings under 50 represents a contraction (Investopedia).
The official index decreased from January’s 50.5 to 50.2 to in February. This drop by 0.3 caused China to hit an eight month low since 50.1 in June 2013. An economist at the Development Research Centre, Zhang Liqun, stated it is fundamental that China consider possible risk factors and further improve macroeconomic policy reserves to strengthen the steady trend in economy growth.
China’s PMI has remained above 50 since October 2012 meaning the manufacturing sector is still on the rise, despite recent slows in growth.
Purchasing Managers Index – PMI (2014) Investopedia. Available at: http://www.investopedia.com/terms/p/pmi.asp [Accessed 2 March 2014]
Yao, K. (2014) “China Official PMI Hits 8-Month Low, Adds to Slowdown Signs”. Reuters, 28 February 2014 [Online]. Available at: http://www.reuters.com/article/2014/03/01/us-china-economy-pmi-idUSBREA2001020140301 [Accessed: 2 March 2014]