China factory data disappoints
CHINA'S manufacturing expanded at a slower pace last month, joining weaker-than-anticipated credit, production and investment data in suggesting the economy is losing momentum.
The Purchasing Managers' Index was at 51.1 for last month, the National Bureau of Statistics and China Federation of Logistics and Purchasing (CFLP) said yesterday in Beijing. The figure missed the median 51.2 estimate in a Bloomberg News survey.
The final reading of a separate manufacturing gauge issued by HSBC Holdings and Markit Economics was 50.2.
Both readings dropped from 51.7 in July and remain above 50, indicating expansion.
A pullback in manufacturing, coming as the property market slumps, adds pressure on the government to step up efforts to meet its expansion target of 7.5 per cent this year. China's stock-index futures rose on speculation of more stimulus.
"We expect the government to interpret such an outlook as challenging its growth target and to take more, and more significant, measures to support growth," Louis Kuijs, Royal Bank of Scotland Group's chief Greater China economist in Hong Kong, said in a note.
Estimates for yesterday's official PMI from 31 analysts ranged from 50.3 to 51.7.
The index is based on responses to surveys sent to purchasing executives at 3,000 companies. It typically registers a higher reading than the HSBC survey, which is based on responses from purchasing managers at more than 420 businesses and is weighted towards smaller private companies.
While the official PMI for big enterprises remained at a level showing expansion, the PMI for medium-sized enterprises dropped to 49.9, and for small businesses, it tumbled to 49.1.
The output sub-index fell 1 point to 53.2, while the new-export order reading declined 1.1 points to 50, the dividing line between expansion and contraction.
"Future industrial production growth may continue to drop slightly," Zhang Liqun, a researcher with the State Council's Development Research Center, said in a CFLP statement.
The MSCI Asia Pacific Index of stocks climbed 0.2 per cent at 9.55am Hong Kong time.
"This official PMI is a bellwether of China's largest and listed companies, so it suggests that they are still moving at a steady pace," Liu Li-Gang, chief Greater China economist at Australia & New Zealand Banking Group in Hong Kong, said on Bloomberg Television.
China's third-quarter growth tends to be slower than usual, and the level of lending last month will be "very critical" for the economy, Dr Liu said.
New credit plunged in July after a June surge, suggesting People's Bank of China governor Zhou Xiaochuan will need to loosen policy to sustain growth if lending continues to dry up.
The central bank recently granted a 20 billion yuan (S$4 billion) re-lending quota to some regional bank branches to support agriculture, according to a statement on its website last week.
The PBOC will also cut interest rates on re-lending to some rural financial institutions meeting certain criteria in poor areas by 100 basis points.