China’s manufacturing growth slowed this month, indicating a recovery in the world’s second-largest economy has yet to fully take hold, HSBC said on Thursday.
The HSBC preliminary purchasing managers index (PMI), which tracks activity in China’s factories and workshops, slipped to 50.3 this month, the British banking giant said in a statement.
The figure was down from a final reading of 51.7 last month and was the lowest for three months, it said.
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The indicator is a closely watched gauge of the health of the Asian economic powerhouse, with a reading above 50 indicating the sector is expanding.
“Today’s data suggest that the economic recovery is still continuing, but its momentum has slowed again,” HSBC economist Qu Hongbin (屈宏斌) said in a statement.
“Industrial demand and investment activity growth will likely stay on a relatively subdued path,” he said, calling for “more policy support” to help consolidate the recovery.
Growth in both domestic and overseas new orders slowed from last month, while input and output prices contracted over the month, suggesting deflationary pressures, according to the statement.
“Both monetary and fiscal policy should remain accommodative until there is a more sustained rebound in economic activity,” Qu said.
China’s economic growth accelerated to a higher-than-expected 7.5 percent in the second quarter, up from the 7.4 percent seen in the previous three months, which was the worst showing since a similar 7.4 percent expansion in the third quarter of 2012.
However, concerns remain over whether the rebound can be sustained in the face of an unruly slowdown in the housing market and risks in the banking sector.
The recovery in the second quarter was largely policy-driven and was “not self-sustaining,” Barclays analysts Chang Jian (常建) and Serena Zhou said in a research note.
The HSBC preliminary Purchasing Managers’ Index and other economic indicators suggested that on-the-ground activities and demand remained soft, they said.
“We continue to believe that the government faces a trade-off between ‘tolerating lower growth’ and ‘rolling out more stimulus’ amid a property market correction and uncertain external demand,” the Barclays economists said, adding that more policy easing was “unavoidable.”
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