Chinese manufacturing activity contracted this month to its weakest rate in eight months, data showed yesterday, the latest indication of slowing growth in the world’s No. 2 economy.
The data is the latest in a string of weak indicators out of Beijing, with analysts suggesting the Chinese government could announce a series of measures to inject life back into the Asian powerhouse.
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 last year’s 47.7, the bank said.
The final figure is due out on April 1.
The index is a closely watched gauge of the health of the Asian economic powerhouse and key driver of global growth. A reading above 50 indicates growth, while anything below signals contraction.
The Chinese 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, Hong Kong-based HSBC chief China economist Qu Hongbin (屈宏斌) said in the statement.
“Weakness is broadly based with domestic demand softening further,” he added.
HSBC expects Chinese authorities to take policy steps to stabilize the Chinese 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,” Qu said.
Other economists also expressed concerns, saying that this month’s 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 research note.
China’s annual Lunar New Year holiday fell in February this year.
A snap Agence France-Presse poll of economists earlier this month predicted a median forecast of 7.4 percent economic growth in China this year.
The government this month set its annual growth target at 7.5 percent, the same as that set last year.
If the actual result comes in below, it would be the first time in 16 years that the objective had not been reached.
The economy grew 7.7 percent last year, the same as in 2012 — which was the slowest rate since 1999.
“The government needs to take quick action in view of its growth target of about 7.5 percent,” Barclays Capital said in an analysis of the PMI data.
Hong Kong-based Nomura International economist Zhang Zhiwei (張智威) said he expects leaders to cut the amount of funds banks must keep in reserve in the second half of the year — a step they have used in the past to boost liquidity.
He also expects fiscal policy to turn “expansionary” in the second quarter to prevent GDP growth from falling below 7 percent.
However, Evans-Pritchard said 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 labor market, the slowdown does not yet appear to warrant a significant stimulus response.”