China Manufacturing May Contract a Sixth Month - Bloomberg

China’s manufacturing may contract for a sixth month in April, adding pressure on officials to adopt more policies to stimulate economic growth.

The 49.1 preliminary reading of the purchasing managers’ index from HSBC Holdings Plc and Markit Economics today compares with a final 48.3 in March. A number below 50 points to a contraction.

The report underscores risks the second-biggest economy may see a deeper slowdown that will restrain world growth as U.S. expansion shows signs of moderating. “Dark clouds,” including high unemployment and oil prices, are threatening a “timid” global recovery, International Monetary Fund Managing Director Christine Lagarde said last week.

“The earlier easing measures have started to work and hence should ease concerns of a sharp growth slowdown,” Qu Hongbin, a Hong Kong-based economist for HSBC Holdings Plc, said in today’s statement. “That said, the pace of both output and demand growth remains at a low level in an historical context and the job market is under pressure. This calls for additional easing measures in the coming months.”

The benchmark Shanghai Composite Index pared losses following the report. The gauge was down 0.3 percent at 10:36 a.m. local time.

The manufacturing index’s six-month contraction, if confirmed in the final reading due May 2, would be the longest since the global financial crisis, when the gauge stayed below 50 for eight months through March 2009.

Slowing Growth

China’s economy expanded 8.1 percent in the first three months from a year earlier, the least in almost three years and the fifth straight slowdown, as export growth slumped and Premier Wen Jiabao waged a campaign to cool consumer and property prices.

The economy still faces “downward pressures,” according to a report of an April 13 State Council meeting chaired by Wen Jiabao. The cabinet reiterated the government will preemptively adjust and fine-tune policies and maintain an appropriate level of investment.

The central bank lowered lenders’ reserve requirements in February for the second time in three months to spur lending and boost growth. Banks including Morgan Stanley and Deutsche Bank AG have raised their China growth forecasts partly on anticipation that authorities may further ease policies to prop up economic expansion.

Today’s preliminary reading, called the Flash PMI, is based on 85 percent to 90 percent of responses to a survey of more than 400 companies, according to HSBC.

Official PMI Expanding

A separate index from China’s logistics federation and the National Bureau of Statistics, which has a different sample and methodology, showed manufacturing expanded for a fourth month in March. Its April reading is scheduled to be released on May 1.

China’s growth may slow further before rebounding in the second half as the property market declines further, Li Daokui, a former central bank adviser, said in an April 18 interview with Bloomberg Television.

Chinese industrial companies had their first January- February profit decline since 2009, a government report showed on March 27.

Maanshan Iron & Steel Co., the second-biggest Hong Kong- traded steelmaker, said this month it may be unprofitable in the first half as slower economic growth curbs demand. Steelmakers in China, the world’s biggest producer, incurred losses totaling more than 1 billion yuan in the first quarter, according to data from the China Iron and Steel Association.

--Zheng Lifei. Editors: Nerys Avery, Scott Lanman

To contact Bloomberg News staff for this story: Zheng Lifei in Beijing at lzheng32@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net