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China manufacturing gauges weaken, indicating economic slowdown

2014-09-01 17:18 Shanghai Daily Web Editor: Si Huan

China's manufacturing sector grew at a slower pace for the first time in five months, indicating a faltered recovery in the world's second-largest economy.

The official Purchasing Managers' Index, a comprehensive gauge of operating conditions in large industrial companies, was 51.1 in August, down from 51.7 in July, the China Federation of Logistics and Purchasing and the National Bureau of Statistics said today. A reading above 50 means expansion.

The reading for August pointed toward first moderation in five months, although it was the second highest so far this year after it reached the peak in more than two years in July.

Zhou Hao, an economist at Australia & New Zealand Banking Group Ltd, said the deceleration was faster than expected and broad-based.

"As the risk of failing to deliver the growth target of 7.5 percent has heightened, the authorities will likely act again and launch more supportive policies," Zhou said.

The components showed that output declined 1 point from a month earlier to 53.2 in August, while new orders and new export orders fell by 1.1 points and 0.8 points respectively, suggesting a slowdown in the demand both home and abroad.

Zhou said the current targeted monetary easing measures have not fundamentally arrested the slowdown, and a cut on the reserve requirements on large commercial banks will be needed to reduce China's funding costs.

The HSBC Purchasing Managers' Index, which represents private sector and small and medium enterprises, posted at 50.2 in August, also down from July's 51.7, which was an 18-month high, HSBC Holdings plc and research firm Markit said.

This signaled only a fractional pace of improvement that was the weakest in three months, said Qu Hongbin, chief economist for China at HSBC.

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