A Chinese manufacturing gauge contracted last month for the first time in more than two years, adding pressure on the central bank to stimulate a faltering economy.
The government’s Purchasing Managers’ Index (PMI) fell to 49.8 last month from 50.1 in December last year, according to data released yesterday by the Chinese National Bureau of Statistics and the China Federation of Logistics and Purchasing (CFLP) in Beijing. That missed the median estimate of 50.2 in a Bloomberg News survey of analysts and for the first time since September 2012 fell below the 50 level that separates expansion and contraction.
China’s fiscal revenue increased the least since 1991 last year due to a property slump and declining factory profits, curbing scope to boost growth with government spending. That might leave the onus on monetary policy to spur the economy.
“We expect such data will weaken further and push the government to take further easing actions,” Deutsche Bank AG Hong Kong-based chief China economist Zhang Zhiwei (張智威).
A seasonal downturn, falling commodity prices, and weak domestic and international demand caused the decline in manufacturing PMI, Chinese National Bureau of Statistics senior statistician Zhao Qinghe (趙清河) said in a statement on the bureau’s Web site.
Most sub-indexes fell, including new orders and new export orders. The sub-index of raw material purchasing prices decreased to 41.9, the lowest in at least a year, on the decline in commodity prices.
“China’s manufacturing sector is still facing de-leveraging pressure,” Australia & New Zealand Banking Group economist Liu Li-Gang (劉利剛) said. “Deflation in the manufacturing sector continues and the destocking process has not yet completed.”
The non-manufacturing PMI fell to 53.7 last month from December last year’s 54.1, according to a separate report by the statistics bureau and the CFLP. Services made up 48.2 percent of the economy last year, up 1.3 percentage points from a year earlier.
“Taken together, the early signs for January point to a continued moderate deterioration in growth,” Bloomberg economist Tom Orlik wrote in a report on Saturday. “With the equity market rally also losing steam, that should set the scene for further easing by the central bank. We continue to expect a further rate cut in the first quarter.”
The central bank lowered benchmark interest rates in November last year for the first time in two years, helping spur stock prices. The benchmark Shanghai Composite Index fell for a fourth day on Friday, capping its biggest weekly decline in a year on concern of regulatory scrutiny on margin lending.
The Chinese economy grew 7.4 percent last year and 7.3 percent last quarter, according to a release by the statistics bureau last month.
“China’s economic downturn will continue in the first quarter, and manufacturing activities will stay in a contraction,” Nomura Holdings Inc China economist Hua Changchun (花長春) said in Hong Kong before the data release. He was the only economist surveyed by Bloomberg to correctly forecast the PMI figure for last month.
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