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UPDATE 1-China Aug official PMI hits 9-month low
September 1, 2012 / 1:51 AM / 5 years ago

UPDATE 1-China Aug official PMI hits 9-month low

* Aug PMI dips to 49.2 from July's 50.1 (forecast 50.0
    * Signals economy still needs fresh policy support

    BEIJING, Sept 1 (Reuters) - China's official factory
purchasing managers' index fell to a
lower-than-expected 49.2 in August from 50.1 in July, official
data showed on Saturday, in a result that is likely to
strengthen the case for further policy steps to bolster growth.
   The official PMI dipped below 50, which demarcates expansion
from contraction, for the first time since November 2011, in the
latest sign that the world's second-biggest economy is
struggling against global headwinds. 
    Economists polled by Reuters this week had expected the
August official PMI to slip to 50. 
    China cut interest rates in June and July and has been
injecting cash into money markets to ease credit conditions to
support the economy that notched a sixth straight quarter of
slower growth in the April-June period.
    But analysts are divided over whether that will be enough to
stop the slowdown extending to a seventh quarter.
    The PMI's output sub-index eased to 50.9 in August from
July's 51.8, the National Bureau of Statistics said. 
   A flash PMI published last week by HSBC plunged to a
nine-month low of 47.8 in August, as new export orders slumped
and inventories rose, a signal that a persistent slowdown in
economic growth has extended deeper into the third quarter.
.
    According to the latest Reuters poll, China's annual
economic growth could pick up to 7.9 percent in the third
quarter from a three-year low of 7.6 percent in the second
quarter in response to government policy fine-tuning.
 
    A raft of weaker-than-expected July data had cooled market
expectations for any quick economic recovery, especially as the
central bank sticks to its "prudent" policy stance for fear of
reigniting property and inflation risks.
    Still, analysts believe the central bank will continue to
loosen policy further by cutting interest rates and banks'
reserve requirement ratio in coming months to support growth.
    The HSBC PMI has been below 50 for 10 straight months,
reinforcing calls from analysts and investors for further
measures from Beijing to support economic growth.
    The official PMI generally paints a rosier picture of the
factory sector than the HSBC PMI as the official survey focuses
on big, state-owned firms, while the HSBC PMI targets smaller,
private firms that have limited access to bank loans.
    There are also differing approaches to seasonal adjustment
in the surveys.
    The final HSBC reading will be published on September 3, as
will the National Bureau of Statistics' services PMI.

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