Manufacturing gauge trig­gers fresh con­cerns on 2014 growth

China Daily (Canada) - - BUSINESS - By BLOOMBERG

A Chi­nese manufacturing gauge fell more than an­a­lysts es­ti­mated in Au­gust as a credit slow­down and prop­erty slump add to risks the world’s sec­ond-largest econ­omy will miss its growth tar­get this year.

The pre­lim­i­nary Pur­chas­ing Man­agers In­dex from HSBC Hold­ings Pl­can­dMarkit Lt­d­wasat 50.3, trail­ing all 22 es­ti­mates in a sur­vey of economists that had a me­dian pro­jec­tion of 51.5. The mea­sure dropped from July’s fi­nal read­ing of 51.7 and, if con­firmed on Sept 1, will be a three-month low. Num­bers above 50 in­di­cate ex­pan­sion.

Af­ter a slump in credit ex­pan­sion and slow­ing growth in in­vest­ment spend­ing in July, Thurs­day’s re­port adds to pres­sure on the gov­ern­ment to do more to sup­port ex­pan­sion that

HSBC PMI READ­INGS economists project will this year be the weak­est since 1990.

“Pres­sure for more pol­icy eas­ing will mount fur­ther, and we con­tinue to ex­pect more tar­geted stim­u­lus mea­sures to be rolled out,” Dar­iusz Kowal­czyk, a se­nior econ­o­mist at Credit Agri­cole CIB in Hong Kong, said in a note. The bank is stick­ing to its 2014 fore­cast of 7.4 per­cent economic growth “but this will only be pos­si­ble if Bei­jing acts quickly to prop up ag­gre­gate de­mand”, he said.

Thurs­day’s re­port, known as the flash PMI, is typ­i­cally based on 85 per­cent to 90 per­cent of re­sponses to sur­veys sent to pur­chas­ing man­agers at more than 420 com­pa­nies. Es­ti­mates of the num­ber from 22 an­a­lysts ranged from 50.6 to 52.0.

A mea­sure of out­put in the sur­vey fell to a three-month low of 51.3 in Au­gust, from 52.8 in July. Read­ings of new or­ders and ex­port or­ders in­creased at a slower pace in Au­gust and the de­cline in em­ploy­ment deep­ened.

“To­day’s data sug­gest that the economic re­cov­ery is still con­tin­u­ing, but its mo­men­tum has slowed again,” Qu Hong­bin, HSBC’s chief China econ­o­mist in Hong Kong, said in the PMI state­ment. “We think more pol­icy sup­port is needed to help con­sol­i­date the re­cov­ery. Both mon­e­tary and fis­cal pol­icy should re­main ac­com­moda­tive un­til there is a more sus­tained re­bound in economic ac­tiv­ity.”

Re­cov­er­ies in the United States and Europe helped ac­cel­er­ate Chi­nese ex­port growth to 14.5 per­cent in July from a year ear­lier, sup­port­ing Pre­mier Li Ke­qiang’s 7.5 per­cent ex­pan­sion tar­get for this year. US re­tail sales stalled in July, sug­gest­ing de­mand may not be strong enough to fuel an ex­port-led ac­cel­er­a­tion.

China’s gross do­mes­tic prod­uct will in­crease 7.4 per­cent this year, ac­cord­ing to a Bloomberg sur­vey car­ried out from Aug 15 to Aug 20.

DONG NAIDE / FOR CHINA DAILY

A worker checks alu­minum prod­ucts at a fac­tory in Zoup­ing, Shan­dong prov­ince. The flash Pur­chas­ing Man­agers In­dex from HSBC Hold­ings Plc and Markit Ltd for Au­gust was 50.3.

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