China’s Factor Sector Drops to Three-Year Low

China’s factory sector decreased dramatically, the most in 32 months, in fact, as the economy continues to weaken and concerns regarding a global recession heighten.

The severe fall in the HSBC flash PMI from 51 to 48 this past month reflects domestic weakness as a result of less output and new orders, even as exports increase. The flash PMI was the lowest since 2009. Added to the already unstable world economy, the news has sent financial markets into a quiet frenzy.

“I’m not sure if it (PMI) is a tipping point, but I think it adds to the evidence,” said HSBC economist Qu Hongbin. Beijing has initiated several measures already, aimed at helping small businesses, to support the economy. The sharp drop in inflationary pressure shows that the city still has hope if it brings in additional, special measures.

“There remains no need to panic,” Hongbin said. “Easing inflation provides room for more easing measures, which will keep China on track for a soft landing.”

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