China factories expanded in June at their slowest pace in 11 months while price pressures eased, a purchasing managers' survey showed on Thursday, the latest evidence the economy is losing steam in response to a spate of tightening steps.
The HSBC flash manufacturing purchasing managers' index (PMI), the earliest available indicator of China's industrial activity, eased to 50.1 in June, which was the lowest since July 2010 and close to indicating a contraction in the sector.
That compares with the final reading of 51.6 in the HSBC PMI for May. A figure above 50 points to expansion on the month.
"Demand is cooling thanks to the effect of tightening measures and the slackness in external markets," said Qu Hongbin, the chief China economist at HSBC.
But Qu added that hard-landing worries were "unwarranted" because the current PMI is at a level consistent with around 13 percent in industrial production growth.
"The good news is that inflationary pressures started to ease meaningfully in June amid slowing demand," he noted.
According to the flash PMI, China's sub-index of factory input prices fell sharply to 52.1 in June, from 60.1 in May.
China's headline inflation hit a 34-month-high of 5.5 percent in May, and many analysts forecast that it could peak in June or July at about 6 percent.
The central bank has launched a series of tightening measures in recent months, including repeated increases in banks' required reserves and interest rates.
The flash PMI is designed to provide a preview of the final data, which is due on June 1 along with the official PMI.
The flash PMI, compiled by British research firm Markit, is based on up to 90 percent of total responses to a monthly survey and is designed to be a snapshot of the final data, usually released on the first working day of the month.
This is the fifth month that HSBC has published a flash PMI for China. In May, the flash reading was 51.1, slightly weaker than the final reading.
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