China is slowing and has been slowing (a lot) for well over a year, yet no one has wanted to believe it, or at least say it. Pretty obvious now.
The Purchasing Managers’ Index unexpectedly fell to 50.1 in July from 50.2 in June. The reading today from the Beijing-based National Bureau of Statistics and China Federation of Logistics and Purchasing was the weakest in eight months and compares with the 50.5 median estimate in a Bloomberg News survey. A reading above 50 indicates expansion.
Today’s data increase odds China will introduce more measures to stem a deceleration in the world’s second-biggest economy that may extend into a seventh quarter. Leaders of the ruling Communist Party pledged yesterday to keep adjusting policies to ensure stable growth, describing the external environment as posing “difficulties and challenges” as the jobless rate in the euro area reached the highest on record.
“It is clear that the manufacturing sector is doing very poorly and requires policy support,” Dariusz Kowalczyk, a Hong Kong-based senior economist and strategist at Credit Agricole CIB, said in a research note today. The chance of an interest- rate cut is “up to about a third now from a quarter yesterday,” and a reduction in banks’ reserve requirements is “fairly imminent,” he said.