Indexes indicate slowing growth

Updated: 2011-09-05 07:51

By Zheng Lifei (China Daily)

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BEIJING - A Chinese non-manufacturing index dropped in August, adding to evidence that growth is moderating in the world's second-largest economy after the government raised interest rates, curbed lending and imposed limits on home purchases.

The non-manufacturing purchasing managers' index (PMI) dipped to 57.6 from 59.6 in July, the China Federation of Logistics and Purchasing said on its website on Saturday. A reading above 50 indicates expansion.

Saturday's data adds to evidence that growth in Asia's biggest economy is slowing. The government's efforts to curb inflation and housing prices is damping demand at home, while a widening sovereign debt crisis in Europe and faltering expansion in developed economies threatens to crimp overseas sales.

"Railway investment started to decline and the effect of a slowdown in some infrastructure investment growth in the construction market has emerged. The significant drop in new-order and construction business activity indexes were the main factors behind the slowdown in the non-manufacturing economy in August," Cai Jin, the Federation's vice president, said in a statement.

The federation's non-manufacturing PMI is based on a survey of about 1,200 companies in 20 industries including transport, real estate, retailing, catering and software.

The gauge of new orders declined to 54.1 from 55.6. The measure of construction business activity dipped to 57.3 from 59.9, according to the statement.

The input price index dropped to 60.2 in August, the lowest level this year, from July's 63.1, indicating that "the prices level is stabilizing", Cai said in the statement.

China's gross domestic product expanded 9.5 percent from a year earlier in the second quarter, slowing from the 9.7 percent gain in the first three months as government tightening policies kicked in.

Citigroup Inc economists estimate the pace of expansion will moderate to 8.9 percent in the third quarter and 8.4 percent in the fourth quarter as export growth to developed economies slides, adding to the domestic slowdown.

A manufacturing index released by the federation on Sept 1 stayed near a 29-month low in August and a separate measure published by HSBC Holdings PLC contracted for the second month. The gauge of export orders in the federation's index contracted for the first time in more than two years while the same measure in the HSBC index showed a reading below 50 for the fourth month.

The slowdown in the economy is "reasonable" and within expectations, Premier Wen Jiabao wrote in an article in Qiushi magazine. He reiterated that stabilizing consumer prices remains the top economic priority.

The government is implementing policies to help low-income households cope with inflation.

A total of 13 provinces raised minimum wages in the first quarter of the year by an average 21 percent, according to the Ministry of Human Resources and Social Security. The personal income tax threshold was raised to 3,500 yuan ($549) a month from 2,000 yuan from Sept 1.

Bloomberg News

(China Daily 09/05/2011 page14)


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