Sputtering factories add to China gloom
CHINESE manufacturing activity contracted this month to its lowest level in eight months, data showed yesterday, prompting calls for policymakers to tackle a painful slowdown of growth in the world's No. 2 economy.
The data is the latest in a string of weak indicators from Beijing, and economists said measures to inject life back into the Asian powerhouse were probably on the horizon.
HSBC's preliminary purchasing managers' index (PMI), which tracks manufacturing activity in China's factories and workshops, fell to 48.1 from a final reading of 48.5 last month, the British bank said in a statement.
The figure is down from 49.5 in January and was the worst result since July's 47.7, according to the bank. The final figure is due out on April 1.
The index is a closely watched gauge of the health of the Asian economic powerhouse, a key driver of global growth. A reading above 50 indicates growth, while anything below signals contraction.
China's National Bureau of Statistics said earlier this month that its own official PMI reading fell to an eight-month low of 50.2 last month.
The latest figure "suggests that China's growth momentum continued to slow down" this month, Mr Qu Hongbin, HSBC's Hong Kong-based chief China economist, said in the statement.
"Weakness is broadly based, with domestic demand softening further," he added.
HSBC expects the Chinese authorities to take policy steps to stabilise the economy, with actions including easing barriers to private investment, spending on urban railways, public housing and fighting air pollution, as well as "guiding lending rates lower", Mr Qu said.
Other economists also expressed concern, pointing out that the March figure usually benefits from a cyclical boost.
"The weakness appears even more pronounced, given that there is usually a seasonal rebound after the Chinese New Year holiday," Capital Economics Asia economist Julian Evans-Pritchard said in a research note.
China's annual week-long Chinese New Year holiday fell largely last month.
The HSBC result came as concerns have been rising over the outlook for China's economy this year, on the back of a series of soft announcements.
This month, the government said industrial production for January-February rose at its slowest pace since 2009, while retail sales grew at their weakest rate in three years.
A recent AFP poll of economists saw a median forecast of 7.4 per cent economic growth in China this year.
"The government needs to take quick action in view of its growth target of about 7.5 per cent," Barclays Capital said in an analysis of the PMI data.
But Mr Evans-Pritchard said the authorities were unlikely to take significant stimulatory action.
"Today's weak PMI reading is the latest sign that slowing credit and investment growth are weighing on domestic demand," he wrote.
"That said, with no sign of stress in the labour market, the slowdown does not yet appear to warrant a significant stimulus response."