China factory output falls
China's official factory gauge signaled a record sixth straight month of deterioration, raising the stakes for policy makers struggling to prop up the economy amid a second bear market in stocks since June and a currency at a five-year low.
The purchasing managers index dropped to a three-year low of 49.4 in January, the National Bureau of Statistics said Monday. That compared with a median estimate of 49.6 in a Bloomberg survey of economists. Numbers below 50 indicate contraction. The official services index also fell, while a private PMI survey signaled the industry shrank an 11th month.
The reports could worsen the dilemma for policy makers: add monetary stimulus to help stem the slowdown in growth, or avoid more easing that could exacerbate record capital outflows and put more pressure on the yuan. Chinese stocks fell, extending January's steepest monthly rout since 2008, threatening to further shake investor faith in how top officials can manage the world's second-largest economy.
"What has happened on the capital account, and how the authorities seem to want to respond to this in terms of policies, make it harder for them to respond to the weak economy by mainstream, forceful monetary measures," said Louis Kuijs, head of Asia economics at Oxford Economics in Hong Kong.
He said he expects more "quasi-fiscal policies" such as expedited spending on infrastructure to be announced in coming months. The People's Bank of China cut the main interest rate six times from late 2014 to late 2015 to a recordlow 4.35 percent.