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Tags: china | manufacturing | growth | orders

China’s Manufacturing Growth Weakens as New Orders Decline

Sunday, 01 July 2012 02:26 PM

China’s manufacturing expanded at the weakest pace this year as new orders and export demand dropped, adding to evidence the nation’s economic slowdown is deepening, a government report showed Sunday.

The Purchasing Managers’ Index fell to 50.2 in June from 50.4 in May, the Beijing-based National Bureau of Statistics and China Federation of Logistics and Purchasing said. That compares with the 49.9 median estimate in a Bloomberg News survey of 24 economists. A reading above 50 indicates expansion.

Sunday’s data increase the odds Premier Wen Jiabao will introduce more stimulus to stem a deceleration in the world’s second-biggest economy that may have extended into a sixth quarter. The central bank will fine-tune economic policies in a “timely and appropriate” manner, central bank Governor Zhou Xiaochuan said on June 29.

“The weaker reading should trigger more-aggressive policy easing,” Sun Junwei, a Beijing-based economist with HSBC Holdings Plc, said before the release. “Economic growth will rebound to over 8.5 percent in the second half once these additional easing measures filter through,” she said.

Steps may include a reduction in interest rates, four cuts in banks’ reserve requirements, more fiscal spending on public works and tax cuts, according to Sun, who forecasts second- quarter economic growth may have slid to 7.8 percent from a year earlier, after slowing to 8.1 percent in the first three months of the year.

Orders Contract

A separate purchasing managers’ index released by HSBC Holdings Plc and Markit Economics indicated that manufacturing may have contracted for an eighth month in June, according to a preliminary reading on June 21. The final reading of the survey, which covers more than 420 companies and is weighted more toward smaller businesses, is due tomorrow.

The federation’s index is based on responses from managers at 820 companies in 31 industries.

A measure of output fell to 52.0 in June from 52.9 the previous month, according to the federation. A gauge of new orders contracted for a second month and export orders contracted for the first time since January.

Gains in China’s currency against the U.S. dollar have stalled as growth in Asia’s biggest economy has slowed and Europe’s debt crisis curbed demand for exports. The yuan weakened 0.88 percent in the second quarter, according to the China Foreign Exchange Trade System, its biggest quarterly decline since a dollar peg ended in 2005.

Profits Fall

UBS AG cut its end-2012 estimate for the yuan to 6.25 to 6.35 per dollar from a previous forecast of 6.15, according to a June 29 note.

The benchmark Shanghai Composite Index has fallen 9.6 percent from this year’s peak on March 2 on concern the government isn’t loosening monetary policy quickly enough to stem a slowdown. The gauge rose for the first time in eight days on June 29 on speculation European turmoil is easing after the region’s leaders agreed to soften repayment conditions for loans to Spanish banks.

Industrial companies’ profits fell for a second month in May, a statistics bureau report showed on June 29, adding to signs the economy is weakening.

Baoshan Iron & Steel Co., China’s biggest publicly traded steelmaker, said June 11 it lowered prices as demand from makers of appliances and cars slowed. Prices were cut by as much as 400 yuan ($63) a metric ton for July delivery, the Shanghai-based company said in a statement on its trade website bsteel.com the same day.

© Copyright 2022 Bloomberg News. All rights reserved.

Sunday, 01 July 2012 02:26 PM
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