China’s manufacturing growth slowed more than economists forecast in June, adding to signs that the world’s fastest-growing major economy is cooling.
The government’s Purchasing Managers’ Index (PMI) declined for a second month, falling to 52.1 from 53.9 in May. The median forecast in a Bloomberg News survey of 12 economists was 53.2. An HSBC Holdings manufacturing index slid to a 14-month low.
Asian stocks fell for a third day as the reports added to concern that a Chinese slowdown combined with austerity measures in Europe may undermine the global recovery. Zhang Liqun, a researcher for the Chinese cabinet, said the data indicates a “steady moderation” to a more sustainable pace of growth after an 11.9 per cent expansion in the first quarter.
“It’s just a slowdown not a meltdown,” said Qu Hongbin, a Hong Kong-based economist at HSBC. Today’s numbers are “more evidence of a slowing Chinese economy from a cyclical peak in the first quarter,” Qu said.
He sees growth of about 9 per cent in the second half, underpinned by “massive ongoing investment” and “robust” private consumption.
The MSCI Asia Pacific Index dropped 1.6 per cent as of 11:59 am in Hong Kong. The Shanghai Composite Index swung between gains and losses after sliding to a 14-month low yesterday.
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Goldman Sachs Group said half of the decline in the government index may be seasonal, with the June PMI tending to be lower than May readings.
Signs of a slowdown as the Chinese government clamps down on property speculation and the effects of its stimulus package fade have unsettled investors. Limited demand in advanced economies has left the world reliant on emerging markets, led by China, to drive a recovery that Group of 20 leaders this week described as “uneven and fragile”.
In China, tempering the expansion may aid government efforts to limit price pressures even after wage rises for Honda Motor Co and Foxconn Technology Group workers. In the government data, a measure of input prices decreased to 51.3 in June from 58.9 in May, the biggest fall in the 11 sub-indexes, as demand weakened and the costs of some commodities fell.
An output index fell to 55.8 from 58.2, the Federation of Logistics and Purchasing said in an e-mailed statement. A measure of new orders slid to 52.1 from 54.8 and an export-order index dropped to 51.7 from 53.8.
The PMI, released by the logistics federation and the Beijing-based National Bureau of Statistics, covers more than 730 companies in 20 industries, including energy, metallurgy, textiles, automobiles and electronics.
Economic growth is moderating, a rebound in exports is weakening, and slower domestic demand is leading to a build-up of finished-goods inventories, the federation said in a separate statement on its website. Industrial production is entering a ‘light season’ and the output of heavy energy users such as metal and oil processors contracted last month, it said.
HSBC’s survey, released with Markit Economics, covers more than 400 manufacturing companies and is weighted more toward smaller, privately owned business than the government’s PMI. The HSBC measure declined to 50.4 from 52.7 in May. Output contracted for the first time in 15 months, according to this survey.
On June 29, the New York-based Conference Board corrected its leading economic index for China to show the smallest gain in five months in April.
Baosteel Group Corp, China’s second-biggest steelmaker, this week scaled back its growth plans, cutting its target for capacity in 2012 by 38 per cent and forecasting a “bumpy, unpredictable and long” global recovery.