China’s manufacturing expanded at the weakest pace this year as new orders and export demand dropped, showing the government has yet to arrest an economic slowdown.
The Purchasing Managersâ€™ Index fell to 50.2 in June from 50.4 in May, the Beijing-based National Bureau of Statistics and China Federation of Logistics and Purchasing said. That compares with the 49.9 median estimate in a Bloomberg News survey of 24 economists. A reading above 50 indicates expansion.
Todayâ€™s data increase the odds Premier Wen Jiabao will introduce more stimulus to stem a deceleration in the worldâ€™s second-biggest economy that may have extended into a sixth quarter. The central bank will fine-tune economic policies in a â€œtimely and appropriateâ€ manner, central bank Governor Zhou Xiaochuan said on June 29.
â€œAlthough the PMI is slightly better than consensus, the underlying trend still indicates a deterioration in economic activity,â€ said Shen Jianguang, Hong Kong-based chief Asia economist for Mizuho Securities Asia Ltd. â€œFurther monetary easing is warranted, with two interest-rate cuts and reserve ratio cuts in the second half increasingly likely.â€
The Peopleâ€™s Bank of China lowered interest rates last month for the first time in more than three years and reduced the amount of cash banks must set aside as reserves three times starting in November.