Latest survey data signalled the quickest deterioration in operating conditions faced by Chinese manufacturers since March 2009. Total new work fell at the quickest rate in over three years, partly driven by a steeper fall in new export business.
As a result, companies cut output at the sharpest rate in six-and-a-half years, while staff numbers fell at the quickest pace since the start of 2009. Reduced production schedules also prompted firms to lower their purchasing activity again in September, while disappointing sales led to the strongest increase in stocks of finished goods for over three years.
the price front, both input costs and output charges fell at sharper rates. Adjusted for seasonal factors, the Purchasing Managers’ Index™ (PMI™) – a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy – registered at 47.2 in September, down fractionally from 47.3 in August. The health of the sector has now deteriorated in each of the past seven months. Furthermore, the latest deterioration was the most marked since March 2009. A key factor weighing on the headline index was a sharper contraction of manufacturing output in September.
According to panellists, worsening business conditions and subdued client demand had led firms to cut their production schedules. Weaker customer demand was highlighted by a further fall in total new orders placed at Chinese goods producers in September. Furthermore, the rate of reduction was the steepest seen for just over three years. Data suggested that the faster decline in total new business partly stemmed from a sharper fall in new export work.
The latest survey showed new orders from abroad declined at the quickest rate since March 2009. Reflective of lower workloads, manufacturing companies cut their staff numbers again in September. Moreover, the latest reduction in employment was the fastest seen in 80 months. Meanwhile, reduced production capacity led to an increased amount of unfinished work, though the pace of backlog accumulation was only slight. Input buying fell for the third month in a row in September, amid reports of lower production schedules and fewer new orders. As a result, stocks of inputs declined again in September at a modest pace.
A number of panellists mentioned adjusting their inventories to reflect reduced production requirements. Meanwhile, disappointing sales led to a build-up in stocks of finished goods for the second consecutive month. Moreover, the pace of accumulation was the strongest seen since August 2012.
