The HSBC Purchasing Managers' Index (PMI) for the Chinese manufacturing sector retreated to 48.2, the lowest level since September 2012 and down from May's final reading of 49.2, as announced by the HSBC.The output sub-index contracted in June for the first time since October last year and factories shed jobs at the quickest pace since August, according to the survey.
The sub-index measuring new orders declined to 47.6 in June, marking the second month in a row of contraction following May's 48.7, and constituting the lowest level since October. The weakening new orders led to an increase in stocks of finished goods in June, the fourth month in a row in which stocks have risen.
"Falling orders and rising inventories added pressure to Chinese manufacturers in June," said Qu Hongbin, China chief economist at HSBC.
"The recent cash crunch in the interbank market is likely to slow expansion of off-balance sheet lending, further exacerbating funding conditions for small and medium enterprises. As the central government refrains from using stimulus, the ongoing growth slowdown is likely to continue in the coming months," Mr. Qu said.
A separate PMI survey released by China's National Bureau of Statistics office showed the index slipping to 50.1 in June from 50.8 in May, but still remaining above the 50-point threshold which separates growth from contraction.