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Growth concerns rise as PMI falls

Updated: 2014-11-04 08:16
By Bloomberg (China Daily)

Latest pullbacks may put pressure on government to press ahead with additional stimulus moves

A gauge of China's services industry fell to a nine-month low in October, joining manufacturing in signaling a broadening economic slowdown.

The government's non-manufacturing Purchasing Managers Index for the sector fell to 53.8 last month from 54 in September.

The official manufacturing PMI released on Saturday was at 50.8 in October compared with September's 51.1. Readings above 50 for both measures indicate expansion.

Both PMI gauges are released by the National Bureau of Statistics and China Federation of Logistics and Purchasing in Beijing.

Analysts suggested the latest pullbacks in services and manufacturing will further test the government's determination to refrain from increased stimulus as the world's second-largest economy heads toward the slowest full-year growth since 1990. The economy expanded 7.3 percent in the third quarter, the weakest pace in more than five years.

"The biggest drivers of growth such as fixed-asset investment are still slowing," said Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd. "Heavy industries like steel and coal are contracting on lower prices, and the negative impact of the weak property market is becoming more pronounced."

Growth slowed from September for output, new orders, new export orders, stockpiles and expectations, according to the manufacturing statement released over the weekend.

The economy "still faces some headwinds" although a downward trend is unlikely after the government implemented policies to stabilize growth in the third quarter, the statement said.

Goldman Sachs Group Inc economists including Song Yu said the manufacturing PMI result reflected weak demand growth in the economy despite the government's loosening efforts.

The non-manufacturing PMI report showed a measure of expectations dropped 1 point from a month earlier, while readings of new orders, input prices and prices charged all increased from September.

According to a government statement citing a State Council meeting chaired by Premier Li Keqiang, China will "stabilize" property-related consumption and make it easier for people to access mandatory housing savings. This came after the central bank relaxed mortgage rules on Sept 30 for homebuyers who have paid off existing loans.

China will support consumption in six areas, including property, e-commerce, environment-friendly products and tourism, according to the statement.

Growth concerns rise as PMI falls

Employees at Shougang Jingtang Iron&Steel Co Ltd in Caofeidian Industrial Area, Tangshan, Hebei province. China's manufacturing PMI released on Saturday was at 50.8 in October, compared with September's 51.1. Jiang Dong / China Daily

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