Bhai Zakir
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Chinas Manufacturing Growth Weakens as New Orders Drop
Chinese manufacturing indexes slipped to seven-month lows as overseas orders dropped, and South Korea cut its estimate for exports this year, underscoring risks to Asian economies from Europes debt crisis.
A purchasing managers index for China fell to 48.2 in June from 48.4 in May, HSBC Holdings Plc and Markit said today. A similar measure released by the government yesterday also slid. South Korea yesterday lowered its export growth forecast to 3.5 percent from 6.7 percent.
China, the worlds biggest exporter, may need to add more stimulus to arrest an economic slowdown after the HSBC report showed the steepest decline in overseas orders since the global financial crisis. The nation's weaker growth is rippling through Asia, with South Koreas sales to China, its largest market, failing to increase in the first 20 days of June.
Its clear the slowdown of export growth as a result of weakness in Europe and the U.S. continues to weigh on the Chinese economy, said Lu Ting, an economist at Bank of America Corp. in Hong Kong. He sees incremental measures such as reserve-ratio cuts and easing lending restrictions to stabilize growth.
The purchasing managers index released yesterday by the Beijing-based statistics bureau and China Federation of Logistics and Purchasing fell to 50.2 in June from 50.4 in May.
Asian stocks headed for their longest winning streak since March today after European leaders agreed on measures to ease the regions debt crisis and as a survey showed large manufacturers in Japan became less pessimistic. The quarterly Tankan index was at minus 1 in June from minus 4 in March, the Bank of Japan said in Tokyo.
Stocks Climb
The MSCI Asia Pacific Index (MXAP) added 0.3 percent in its fourth day of gains as of 11:30 a.m. in Tokyo. Futures on the Standard & Poors 500 Index slipped 0.2 percent.
HSBC and Markit said the latest Chinese data showed inflation pressures waning, a slump in export orders, a lack of domestic demand and a decline in the size of the manufacturing workforce.
The June reading for Chinas official PMI, based on responses from 820 companies in 31 industries, compared with the 49.9 median estimate of 24 economists surveyed by Bloomberg News. The dividing line between expansion and contraction is 50. The HSBC report covers more than 400 companies.
Companies from Nike Inc. to McDonalds Corp. and Caterpillar Inc are feeling the effects of a cooling Chinese economy. Nike said last week that it has too much inventory there.
Economic Slide
While yesterdays PMI reading was slightly better than consensus, the underlying trend still indicates a deterioration in economic activity, said Shen Jianguang, Hong Kong-based chief Asia economist for Mizuho Securities Asia Ltd. Further monetary easing is warranted, with two interest-rate cuts and reserve ratio cuts in the second half increasingly likely.
The Peoples Bank of China lowered interest rates last month for the first time in more than three years and has reduced the amount of cash banks must set aside as reserves three times, starting in November. The ratio stands at 20 percent for the biggest banks.
Shen estimates economic growth slid to 7.2 percent in the second quarter from a year earlier while Bank of Americas Lu says 7.5 percent. Gross domestic product expanded 8.1 percent in the first three months of the year, the fifth quarterly slowdown and the slowest pace in almost three years.
Export Orders
The gauge of export orders in the federations index contracted for the first time since January. A similar measure in HSBCs report fell by the most in more than three years.
Tumbling export orders point to headwinds to exports in the third quarter, suggesting domestic demand needs to pick up to stabilize growth, Chang Jian, a Hong Kong-based economist at Barclays Capital, said yesterday.
South Koreas exports rose 1.3 percent in June from a year earlier, the Ministry of Knowledge Economy said yesterday. That compared with the 0.5 percent median estimate in a Bloomberg News survey of analysts and an 11.1 percent increase a year earlier. Shipments to the European Union fell 22.7 percent from a year earlier in the first 20 days of June and sales to China were flat, the data showed.
Around the world today, the EUs statistics office will say unemployment in the 17-nation euro area rose to 11.1 percent in May, according to the median estimate in a Bloomberg News survey. The jobless rate was 11 percent in March and April, the highest on record.
In the U.S., manufacturing probably grew at a slower pace in June, with the Institute for Supply Managements factory index showing a decline to 52.0, the lowest level in eight months, according to economists surveyed by Bloomberg.
China
Chinese manufacturing indexes slipped to seven-month lows as overseas orders dropped, and South Korea cut its estimate for exports this year, underscoring risks to Asian economies from Europes debt crisis.
A purchasing managers index for China fell to 48.2 in June from 48.4 in May, HSBC Holdings Plc and Markit said today. A similar measure released by the government yesterday also slid. South Korea yesterday lowered its export growth forecast to 3.5 percent from 6.7 percent.
China, the worlds biggest exporter, may need to add more stimulus to arrest an economic slowdown after the HSBC report showed the steepest decline in overseas orders since the global financial crisis. The nation's weaker growth is rippling through Asia, with South Koreas sales to China, its largest market, failing to increase in the first 20 days of June.
Its clear the slowdown of export growth as a result of weakness in Europe and the U.S. continues to weigh on the Chinese economy, said Lu Ting, an economist at Bank of America Corp. in Hong Kong. He sees incremental measures such as reserve-ratio cuts and easing lending restrictions to stabilize growth.
The purchasing managers index released yesterday by the Beijing-based statistics bureau and China Federation of Logistics and Purchasing fell to 50.2 in June from 50.4 in May.
Asian stocks headed for their longest winning streak since March today after European leaders agreed on measures to ease the regions debt crisis and as a survey showed large manufacturers in Japan became less pessimistic. The quarterly Tankan index was at minus 1 in June from minus 4 in March, the Bank of Japan said in Tokyo.
Stocks Climb
The MSCI Asia Pacific Index (MXAP) added 0.3 percent in its fourth day of gains as of 11:30 a.m. in Tokyo. Futures on the Standard & Poors 500 Index slipped 0.2 percent.
HSBC and Markit said the latest Chinese data showed inflation pressures waning, a slump in export orders, a lack of domestic demand and a decline in the size of the manufacturing workforce.
The June reading for Chinas official PMI, based on responses from 820 companies in 31 industries, compared with the 49.9 median estimate of 24 economists surveyed by Bloomberg News. The dividing line between expansion and contraction is 50. The HSBC report covers more than 400 companies.
Companies from Nike Inc. to McDonalds Corp. and Caterpillar Inc are feeling the effects of a cooling Chinese economy. Nike said last week that it has too much inventory there.
Economic Slide
While yesterdays PMI reading was slightly better than consensus, the underlying trend still indicates a deterioration in economic activity, said Shen Jianguang, Hong Kong-based chief Asia economist for Mizuho Securities Asia Ltd. Further monetary easing is warranted, with two interest-rate cuts and reserve ratio cuts in the second half increasingly likely.
The Peoples Bank of China lowered interest rates last month for the first time in more than three years and has reduced the amount of cash banks must set aside as reserves three times, starting in November. The ratio stands at 20 percent for the biggest banks.
Shen estimates economic growth slid to 7.2 percent in the second quarter from a year earlier while Bank of Americas Lu says 7.5 percent. Gross domestic product expanded 8.1 percent in the first three months of the year, the fifth quarterly slowdown and the slowest pace in almost three years.
Export Orders
The gauge of export orders in the federations index contracted for the first time since January. A similar measure in HSBCs report fell by the most in more than three years.
Tumbling export orders point to headwinds to exports in the third quarter, suggesting domestic demand needs to pick up to stabilize growth, Chang Jian, a Hong Kong-based economist at Barclays Capital, said yesterday.
South Koreas exports rose 1.3 percent in June from a year earlier, the Ministry of Knowledge Economy said yesterday. That compared with the 0.5 percent median estimate in a Bloomberg News survey of analysts and an 11.1 percent increase a year earlier. Shipments to the European Union fell 22.7 percent from a year earlier in the first 20 days of June and sales to China were flat, the data showed.
Around the world today, the EUs statistics office will say unemployment in the 17-nation euro area rose to 11.1 percent in May, according to the median estimate in a Bloomberg News survey. The jobless rate was 11 percent in March and April, the highest on record.
In the U.S., manufacturing probably grew at a slower pace in June, with the Institute for Supply Managements factory index showing a decline to 52.0, the lowest level in eight months, according to economists surveyed by Bloomberg.
China
