China Manufacturing PMI, As Reported By HSBC, Drops to 9-Month Low In June Hinting At Continuing Slowdown

China's manufacturing activity expanded at a slower rate in June, according to data released Monday by the country's National Bureau of Statistics and the China Federation of Logistics and Purchasing, while a separate survey by HSBC showed that China’s factory output contracted for a second straight month, to a nine-month low, in June, underscoring concerns of a slowdown in the Chinese economy.

The official data from the Purchasing Managers' Index, or PMI, for China's manufacturing sector showed that the index fell to 50.10 in June, from 50.8 in the previous month. A reading above 50 points indicates growth while a reading below 50 indicates contraction.

However, according to HSBC's Purchasing Managers’ Index, also released on Monday, China's manufacturing activity fell to 48.2 -- its lowest level since September 2012, and down from May’s final reading of 49.2. A preliminary reading released on June 20 had showed the HSBC PMI for June at 48.3.

“Falling orders and rising inventories added pressure to Chinese manufacturers in June,” said Hongbin Qu, China chief economist at HSBC.

The data pointed to a modest rate of contraction in output as new orders fell, mainly due to weaker demand. However, new orders from abroad fell in June at the fastest rate in the past eight months “and the joint-sharpest in over four years,” the HSBC release said.

And, the contraction is despite a fall in inputs costs for the fourth successive month at a solid pace, and producers passing on the savings to the clients in the form of price reductions. HSBC's Qu said that the economic slowdown could continue in coming months.

"The recent cash crunch in the interbank market is likely to slow expansion of off-balance sheet lending, further exacerbating funding conditions for SMEs. As Beijing refrains from using stimulus, the ongoing growth slowdown is likely to continue in the coming months," Qu said.

The Shanghai Composite dropped 0.75 percent on Monday morning following the disappointing survey figures but Hong Kong's Hang Seng index was trading up 1.8 percent.

The difference in data from the two surveys could be linked to a variation in the sample size. HSBC's report on China's manufacturing sector is based on data compiled from the responses of more than 400 manufacturing companies, while the official Chinese PMI is based on the response of about 3,000 firms.