China PMI Falls Below 50 and Europe Stagnates---Markit -HSBC Flash PMI

                              HSBC Flash China Manufacturing PMI™
Chinese manufacturing production declines at fastest rate since March 2009
• Flash China Manufacturing PMI™ at 48.9 (50.1 in June). 28-month low.
• Flash China Manufacturing Output Index at 47.2 (49.8 in June). 28-month low.
Data collected 12–19 July.
The HSBC Flash China Manufacturing Purchasing Managers’ Index™ (PMI™) is published on a monthly basis approximately one week before final PMI data are released, making the HSBC PMI the earliest available indicator of manufacturing sector operating conditions in China. The estimate is typically based on approximately 85%–90% of total PMI survey responses each month and is designed to provide an accurate indication of the final PMI data.

Commenting on the Flash China Manufacturing PMI survey, Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC said:
“Headline flash PMI fell below 50 for the first time since July 2010, suggesting slowing momentum of manufacturing activities. This implies that June's rebound in industrial production was just temporary. We expect industrial growth to decelerate in the coming months as tightening measures continue to filter through. That said, resilience of consumer spending and continued investment in a massive amount of infrastructure projects should support a nearly 9% rate of GDP growth in the rest of the year.”
                                          Markit Flash Eurozone PMI
               Eurozone growth slows to near-stagnation in July----- Markit PMI

    Flash Eurozone PMI Composite Output Index(1) at 50.8 (53.3 in June). 23-month low.
􀂃 Flash Eurozone Services PMI Business Activity Index(2) at 51.4 (53.7 in June). 22-month low
􀂃 Flash Eurozone Manufacturing PMI (3) at 50.4 (52.0 in June). 22-month low.
􀂃 Flash Eurozone Manufacturing PMI Output Index(4) at 49.5 (52.5 in June). 2-year low.
                                         Data collected 12-20 July
The Markit Flash Eurozone PMI® Composite Output Index, based on around 85% of usual monthly replies, fell from 53.3 in June to 50.8 in July. The latest reading was the lowest since August 2009 and signalled a near-stagnation of private sector output, the rate of growth having slowed sharply in each of the past three months. The month-on-month fall in the Output Index in July was the largest since November 2008.
 ***Manufacturing output declined – albeit only marginally – for the first time since July 2009, while activity growth slowed sharply in services to the weakest since September 2009.
The deterioration in the survey’s output indicators reflected weaker order book trends. Across both sectors, new business showed only a very marginal increase in July, registering the smallest rise since demand for goods and services first started growing again back in September 2009. Levels of incoming new business fell in manufacturing for the second month in a row, declining at the fastest rate since June 2009 – with new export orders dropping for first time since July 2009. Service sector new business meanwhile showed the weakest rise since November 2009, the rate of growth having lost almost all of the strong momentum seen earlier in the year.

Forward-looking indicators failed to improve. Expectations of service sector activity in the coming year were unchanged compared to June – which had seen the lowest level of optimism since July 2009. At the same time, the ratio of manufacturing new orders to inventories, which acts as a guide to near-term output developments, fell to the lowest since April 2009.
The rate of expansion across both sectors slowed in both Germany and France, dropping especially sharply in the former. Germany saw the weakest rate of growth in two years, while French growth was the slowest since August 2009. Elsewhere, outside of the two largest countries, output fell for the second successive month, and at the steepest rate since August 2009.
Employment growth held up well in the face of the near-stagnation of both output and order books, running below the rate seen earlier in the year but up marginally compared with June. Minor upturns in the rate of job creation were seen in both manufacturing and services, with the former continuing to see the stronger rate of growth. Staffing levels rose in France and Germany, but fell overall across the rest of the region.
Backlogs of work fell for the first time since November 2009. Although only slight, the decline suggests that headcounts may be reduced in coming months unless inflows of new work revive. Manufacturers reported a steeper drop in outstanding work than service providers.
Price pressures eased during the month. Average prices charged for goods and services rose at the weakest rate for six months, while input price inflation across the two sectors dropped to a 12-month low.