BEIJING, Nov 3 (Reuters) - China's manufacturing sector weakened sharply in October as firms' order books shrank in the face of the global economic downturn, a survey by brokerage CLSA showed on Monday.
CLSA's Purchasing Managers' Index (PMI) fell to 45.2 from 47.7 in September. It is the weakest reading since the survey was launched in April 2004 and the third straight month that it has come in below the boom-bust line of 50 to indicate a manufacturing contraction.
The government's official PMI for October, released on Saturday, also plunged to a record low of 44.6 from 51.2 in September. [ID:nPEK253806]
Both output and new orders fell at their fastest pace in the history of the CLSA survey, as did the number of people employed in the manufacturing sector.
The fall in the PMI reading underlines the extent to which China's fortunes are tied to those of a slowing global economy, said Eric Fishwick, head of economic research at CLSA.
"Chinese manufacturers are seeing their order books cut, both at home and abroad, as the world economy falls into recession," Fishwick said.
A recent drop in input prices accelerated in October, but that offered little consolation to firms that found their own pricing power undermined by weaker demand.
"Costs are falling but so are output prices. The coming 12 months will be difficult ones for manufacturers, China included," Fishwick said.
The PMI index is designed to give a timely snapshot of business conditions in the manufacturing sector.
Following is a breakdown of CLSA's PMI (seasonally adjusted):
Oct Sep Aug Jul Jun May Apr Overall PMI 45.2 47.7 49.2 53.3 53.3 54.7 55.4 Output 43.4 46.7 46.1 53.4 54.0 56.7 57.9 New orders 43.8 45.8 49.4 54.8 55.2 57.3 58.6 Employment 48.2 49.4 49.8 50.2 50.1 51.1 51.9 Supply delivery times 51.2 48.4 45.5 42.6 44.1 45.0 46.2 Stocks of purchases 42.8 46.9 47.1 48.0 48.6 48.3 48.9
Following is a breakdown of another six sub-indexes that are not components of the PMI (seasonally adjusted):
Oct Sep Aug Jul Jun May Apr Input prices 35.9 51.2 61.5 86.1 81.0 74.3 75.2 Quantity of purchases 42.8 47.8 47.5 54.1 55.7 56.2 58.8 Finished goods stocks 49.3 51.6 48.8 48.5 47.0 48.5 48.1 New export orders 44.3 45.9 49.0 51.8 52.4 52.2 52.0 Output prices 39.9 48.4 56.8 66.3 65.2 62.0 62.4 Backlogs of work 49.4 49.5 48.8 52.2 54.2 53.1 53.0
The index is derived from a survey carried out by research firm Markit Economics, which also highlighted the following findings:
-- The output sub-index hit at a record low, as incoming new orders stagnated under the weight of the worsening global economic climate.
-- New orders by both domestic and overseas clients fell at their fastest pace in the history of the survey, marking the third straight month of decline. Over one third of respondents said they had fewer new orders in October than in September.
-- Staffing levels fell for the third straight month, at the most rapid pace in the history of the survey. Around 12 percent of firms cut jobs during the month as workloads fell.
-- Nearly half of firms said their input costs fell during the month, as weaker demand for a range of commodities pushed down prices, and 28 percent of respondents lowered the prices of their finished goods.
-- The fall in new orders contributed to a fall in firms' backlogs of unfinished work. Deteriorating market conditions encouraged firms to trim their inventories of finished goods.
-- Manufacturers trimmed back their purchases of inputs at the most rapid pace in the history of the survey, as many sought to use existing inventories of inputs. That sent the sub-index for stocks of purchases to a record low. (Reporting by Jason Subler; Editing by Nick Macfie)