China’s manufacturing expanded at the slowest pace in nine months in May as the government extended a campaign to cool inflation and the property market, a survey of companies indicated.
The Purchasing Managers’ Index (PMI) was at 52 from 52.9 in April, the China Federation of Logistics and Purchasing said in an emailed statement. The number was higher than the median forecast of 51.6 in a Bloomberg News survey of 16 economists. The index has a seasonal pattern of falling in May, economists said before the release.
Premier Wen Jiabao has yet to tame prices in the fastest-growing major economy as food and housing costs climb, McDonald’s Corp charges more for soft drinks, and a drought in Yangtze River areas threatens grain production. Today’s data suggested moderating economic growth may aid his campaign, with input-price inflation easing as manufacturers’ orders and output grew at a slower pace.
“The data suggests continued moderation in industrial activities,” said Li Wei, a Shanghai-based economist at Standard Chartered Bank. At the same time, the reading was strong enough to alleviate “fears of a sharp slowdown, and thus marginally increases the chance of a further rate hike in the nearterm,” Li said.
The nation’s fifth interest-rate increase since mid-October may come as early as this weekend, which is extended by a holiday on Monday, the economist added.
More Evidence
A separate PMI released today indicated the weakest manufacturing growth in 10 months. That index, released by HSBC Holdings Plc and Markit Economics, is based on a survey of more than 400 companies, while the data released jointly by the logistics federation and the statistics bureau covers more than 800.
The Shanghai Composite Index has fallen more than 10 per cent from this year’s high in April, and analysts have pared economic growth forecasts as monetary tightening starts to bite. The benchmark slid another 0.5 per cent as of 11.06 am local time, while the yuan was little changed at about 6.48 per dollar.
Slower expansions in the Asia Pacific region may fuel concern that growth will falter in a global economy already hampered by Japan’s disaster and Europe’s debt crisis.
India, Australia
India’s expansion cooled in the first quarter even as inflation pressures persisted, a government report showed yesterday. Australia’s economy shrank by the most in 20 years because of natural disasters, a statistics bureau report showed today.
Zhang Liqun, a senior researcher at the State Council’s Development Research Center, said he saw an increased possibility that China’s economic growth will moderate, adding that destocking by companies may be a factor. In a statement, the logistics federation said that inflation pressures from commodity costs are easing.
China’s economy expanded 9.7 per cent in the first quarter from a year earlier, while consumer prices exceeded the government’s 4 per cent target in each of the first four months of this year. Nomura Holdings Inc has trimmed its 2011 growth forecast to 9.4 per cent from a previous estimate of 9.8 per cent, after cuts by Goldman Sachs Group Inc and JPMorgan Chase & Co.
‘Excessive Downturn’
The nation risks an “excessive downturn” if tightening measures last too long, Ba Shusong, a researcher at the State Council’s Development Research Center, said in a commentary published May 24. Non-deliverable yuan forwards fell in May by the most since November on speculation that a weaker economic expansion will encourage officials to slow the pace of the currency’s appreciation against the dollar.
