Manufacturing growth in much of Asia slowed further in July and even contracted in China, signaling that previous monetary tightening and sluggish economies globally are pinching Asian growth.
According to one closely watched release, Chinese manufacturing activity contracted last month, a reading that could impact global attitudes toward risk. The HSBC monthly purchasing managers' index dropped to 49.3 in July from 50.1 in June.
That was a slight improvement from a preliminary estimate of 48.9 released a few days ago, but still marks the lowest reading on the HSBC PMI since March 2009. A figure below 50 indicates that manufacturing activity contracted, while a reading above that line indicates expansion.
China's official purchasing managers' index for July, also released Monday, fell to 50.7 from 50.9 in June, declining for a fourth straight month but remaining just barely in expansionary territory.
Li Cui, a China economist at Royal Bank of Scotland, said production and inventories were down in July but new orders, employment and supply deliveries rose, indicating that demand is still solid.
"Given the elevated inflation pressure and the robust growth seen from the Q2 GDP figures, I expect the tightening stance will remain in place," she said.
Ms. Cui said the discrepancy between the two PMI readings is partly due to the fact that the HSBC index encompasses more small manufacturers. The official survey better reflects firms' significance in the Chinese economy, she said.
The further manufacturing slowdown is a sign that PBOC tightening over recent months "is biting," said Prakash Sakpal, an economist at ING Bank. The PBOC "is determined to bring inflation under control. We cannot rule out the likelihood of more rate hikes if inflation remains above 6%."
The PBOC has lifted its policy rate and raised bank reserve requirements several times since last fall in an effort to curb rising prices.
Other countries mirrored China's slowdown. In Taiwan, whose manufacturing sector is closely linked to the Chinese economy, the HSBC PMI for July fell to 46.1, marking a second straight month of contraction. That was down from 49.9 in June.
Meanwhile, a downturn in Australian manufacturing accelerated rapidly in July, according to a survey of 200 firms, as the soaring Aussie dollar pressured exports and the domestic economy weakened. The Australian Industry Group-PricewaterhouseCoopers PMI slid 9.5 points in July from a month earlier to 43.3.
In India, manufacturing activity fell to a 20-month low in July, according to HSBC's PMI measure, falling to 53.6 from 55.3 in June.
South Korea was an exception to the general cooling trend, where manufacturing expanded modestly in July. HSBC's South Korea PMI rose to 51.33 in July from 51.13 in June.