BEIJING--China's economy sputtered on in August with factory
output slowing, according to two measures, as the effect of
stimulus measures earlier this year fades.
The official Purchasing Managers Index fell to 51.1 in August
from 51.7 in July, which was a 27-month high on recovering exports,
the China Federation of Logistics and Purchasing said in a
statement Monday.
Meanwhile, HSBC Holdings PLC reported that its China
manufacturing PMI for August fell to 50.2 from 51.7 in July. Both
output and new orders at smaller firms recorded weaker expansions
in August, HSBC said, while job shedding intensified.
A reading above 50 indicates an expansion from the previous
month while a figure below 50 points to a contraction. The official
PMI was roughly in line with a median 51.0 forecast of 10
economists polled earlier by The Wall Street Journal.
Analysts said Monday's data suggest that China's economy is
experiencing a second slowdown this year after peaking in July,
dragged down by China's real estate slump and credit concerns. Some
said the flagging activity shows that the government will need to
resort to more stimulus measures, which accelerated infrastructure
spending and loosened lending to rural areas and some sectors, to
hit its growth target.
"I don't think they can deliver their 7.5% annual target without
a lot more stimulus," said Macquarie Group economist Larry Hu.
The two PMIs tend to capture different activity, with the
official measure favoring large state-owned companies while HSBC's
tracks more small and medium-size companies. So the downward trend
in both measures suggests a broader slowdown.
New orders and new export orders also declined, according to the
official gauge, indicating that China's industrial sector is facing
growing challenges in its investment and operating environment,
analysts said.
"This shows that the pressure on Chinese growth has spread from
real estate to manufacturing," said Crédit Agricole CIB economist
Dariusz Kowalczyk. "The whole second half will see downward
pressure on manufacturing and the whole Chinese economy."
HSBC chief economist Qu Hongbin said external demand improved
last month but domestic demand appeared subdued. "We think the
economy still faces considerable downside risks to growth in the
second half of the year, which warrant further policy easing to
ensure a steady growth recovery," Mr. Qu said in a statement.
Economic growth in China recovered in the second quarter to 7.5%
year on year after hitting 7.4% in the first quarter, the slowest
pace in 18 months. But since then, growth in several real estate,
retail and investment indicators has decelerated or reversed,
underscoring the challenges ahead for Chinese policy makers. Credit
was also squeezed in July after strong expansion in June, which
some analysts attributed to banks' desire to meet bookkeeping
requirements at the end of the second quarter.
Average new home prices fell in China in August for the fourth
straight month, albeit at a slower pace, declining 0.6% compared
with July's 0.8% decline, data provider China Real Estate Index
System reported late Sunday, as property developers continue to
battle excess supply.
Liyan Qi and Mark Magnier and Esther Fung