China March flash HSBC PMI contracts to 11-month low, fans policy easing expectations

Tue Mar 24, 2015 7:11am EDT
 
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By Kevin Yao

BEIJING (Reuters) - Activity in China's factory sector dipped to a 11-month low in March as new orders shrank, a private survey showed, signaling persistent weakness in the world's second-largest economy that will likely fuel calls for more policy easing to support growth.

The poor reading added to signs that the economy has lost momentum despite two interest rate cuts since November, a reduction in the amount of money banks must keep in reserve and repeated attempts by the central bank to reduce financing costs.

The flash HSBC/Markit Purchasing Managers' Index (PMI) dipped to 49.2 in March, below the 50-point level that separates growth in activity from contraction on a monthly basis. Economists polled by Reuters had forecast 50.6, slightly weaker than February's final PMI of 50.7.

Some analysts expect first-quarter economic growth to dip below the government's new full-year target of 7 percent - widely seen as the level needed to keep employment steady.

"The weaker PMI data could increase pressure for policy loosening," economists at CICC said in a research note.

They predicted the central bank would cut banks' reserve requirement ratios (RRR) six more times this year, on top of another interest rate cut.

JPMorgan said the next RRR cut may come as soon as April.

Asia stocks fell after the PMI report on Tuesday, with shares in Shanghai skidding more than 2 percent, while the Australian dollar dipped AUD=D4. [MKTS/GLOB]   Continued...

 
A woman (sitting) races with a textile robot (L) made by domestic manufacturer Anhui Efort at an expo in Shanghai July 10, 2014. REUTERS/Pete Sweeney