A Chinese manufacturing index fell after the government raised interest rates and lenders’ reserve requirements and allowed gains in the yuan to pick up pace.
The Purchasing Managers’ Index was at 52.9 in April from 53.4 in March, China’s logistics federation and the statistics bureau said in an e-mail today. That was below a median forecast of 53.9 in a Bloomberg News survey of 20 economists.
China’s economic expansion, a driver of global growth, may moderate as the government counters the fastest inflation since 2008 and cools a real-estate market that has been at risk of price bubbles. Credit Suisse Group AG says a fifth increase in benchmark interest rates since the global financial crisis may come as early as tomorrow, a Chinese holiday, less than a month after the previous move.
“Growth has been cooled a bit but inflationary pressures have not been meaningfully alleviated,” Qu Hongbin, the Hong Kong-based chief China economist at HSBC Holdings Plc, said before today’s release. “While aggressive tightening seems unlikely, Beijing does need to keep the current pace of tightening for another three to four months to tame inflation.”
Zhang Liqun, a senior researcher at the State Council’s Development Research Center, said in today’s statement that the latest numbers show an increased likelihood that economic growth will slow. Gross domestic product expanded 9.7 percent in the first quarter from a year earlier and the World Bank last week forecast a full-year expansion of 9.3 percent.
An executive at billionaire investor Warren Buffett’s Burlington Northern Santa Fe expressed confidence that the Asian nation will continue to maintain a pace of growth that bolsters the global expansion.
“I’m very, very bullish about the recovery,” Matt Rose, chief executive officer of the railroad business, said yesterday in an interview in Omaha, Nebraska. “It’s really driven by worldwide demand, specifically China.”
China’s consumer prices jumped 5.4 percent in March, compared with the government’s full-year target of 4 percent. Premier Wen Jiabao aims to restrain inflation that he describes as a “tiger” -- once out of control, difficult to tame -- while also boosting private consumption and shifting the economy from an excessive dependence on exports and investment.
The International Monetary Fund indicated last week that the premier may be winning the battle to contain prices.
“The current episode of inflation does not look like a bout of generalized overheating, with China’s strong growth beginning to bump up against capacity constraints,” the IMF said in a report. “Barring future supply shocks either domestically or in global commodity markets, inflation in China is likely to return toward the low single digits in the second half of 2011.”
The yuan strengthened beyond 6.5 per dollar for the first time since 1993 on April 29 as the U.S. currency slid. A stronger yuan may help to cool inflation by effectively making imports cheaper.
The logistics federation said today’s data showed an “appropriate adjustment” in growth as the nation alters the structure of its economy. Export orders and input prices grew at a slower pace, while an index of output was little changed from the level in March.
Coal and electricity supplies are tight, according to some companies, a situation that needs to be monitored, the logistics group said in a separate statement on its website.
The survey released today was of 820 companies in 28 industries, such as textiles and oil processing. A separate PMI, released by Markit Economics and HSBC, had indicated that manufacturing grew at the same pace in April as in March. That survey covered more than 430 companies.