China's Manufacturing Index Slips This Month To 8-Month Low, But New Export Orders Show Growth

Chinese manufacturing weakened again this month, extending a decline that began last summer, the flash Purchasing Managers' Index (PMI) of HSBC Holdings PLC (LON:HSBA) revealed Monday.

The widely followed metric dropped to an eight-month low of 48.1 in March, compared with a final reading of 48.5 in February. The reading remains below the 50-mark that divides contraction from expansion in the sector.

Economists polled by Bloomberg were expecting a reading of 48.7, up from 48.5 in February. Markets are sensitive to the release as worry increases regarding the financial health of the world's second-biggest economy.

The manufacturing output sub-index dropped to an 18-month low of 47.3. Most of the sub-indexes showed deterioration, but new export orders provided a silver lining.

"The HSBC Flash China Manufacturing PMI reading for March suggests that China’s growth momentum continued to slow down," said Hongbin Qu, HSBC China's chief economist. "Weakness is broadly-based with domestic demand softening further. We expect Beijing to launch a series of policy measures to stabilize growth. Likely options include lowering entry barriers for private investment, targeted spending on subways, air-cleaning and public housing, and guiding lending rates lower."

The flash index is published ahead of final PMI data and is often based on 85 percent to 90 percent of total survey responses each month.