Sunday, February 1, 2015

CHINA FACTORY OUTPUT FALLS IN JANUARY

From the Hong Kong Standard--

Gloom over surprise fall in factory output

Monday, February 02, 2015


China's factory sector unexpectedly shrank for the first time in nearly 2 years in January with firms seeing more gloom ahead, an official survey showed, raising expectations that policymakers will take more action to forestall a sharper slowdown. The official purchasing managers' index fell to 49.8, the National Bureau of Statistics said, a low last seen in September 2012, a whisker below the 50-point level separating growth from contraction. The December level was 50.1, and a poll saw a better result, 50.2, for January. Only one of 11 economists in the poll predicted a January contraction. Most of the PMI indexes "showed a downward trend, indicating that current economic growth is still in a downtrend," said Zhang Liqun, an economist at the Development Research Center, a state think-tank. Some economists said the January reading was especially downbeat as it suggested that factories did not enjoy a usual spike in business before China's annual Spring Festival holiday, which falls in mid-February this year. The poor January official PMI fueled bets that more monetary policy loosening is in store in the world's second-largest economy. "China still needs decent growth to add 100 million new jobs this year, plus China is entering a rapid disinflation process," ANZ economists said in a note to clients. "We [think] the People's Bank of China will cut the reserve requirement ratio by 50 basis points, and cut the deposit rate by 25 basis points in the first quarter."
Hit by a housing slump, erratic growth in exports and a state-led slowdown in investment, China's economy has steadily lost steam in the past year as growth sunk to a 24-year low of 7.4 percent. And the downturn has also broadened into the country's burgeoning services sector, where growth cooled to a one-year low in January. Accounting for 48 percent of China's US$10.2 trillion (HK$79.56 trillion) economy last year, the services sector had weathered the growth downturn better than factories. REUTERS