China Manufacturing Gauge Signals Slowdown Persisting: Economy

China’s manufacturing expanded at a weaker pace in April in a sign that the slowdown in the world’s second-largest economy is extending into the second quarter.

The Purchasing Managers’ Index was at 50.6, the National Bureau of Statistics and China Federation of Logistics and Purchasing said today in Beijing. That compared with the 50.7 median forecast of 31 analysts in a Bloomberg News survey and a March reading of 50.9. Readings above 50 signal expansion.

Australian stocks fell and copper declined as the report increased concern that demand from China for commodities will slow. The figures add to data showing growth in industrial companies’ profits decelerated in March and Aluminum Corp. of China Ltd., the nation’s biggest producer of the lightweight metal, having a sixth straight quarterly loss.

“The debate about growth -- and just how much we should worry about this weak recovery -- is likely to build in Beijing,” said Stephen Green, head of Greater China research at Standard Chartered Plc in Hong Kong. Today’s number is “disappointing,” he said in an e-mail.

A private survey of China manufacturing by HSBC Holdings Plc and Markit Economics had a preliminary reading of 50.5 for April, down from the final level of 51.6 for March, a report showed last month. The final figure will be released tomorrow.

Signs of slowing expansion are spreading across Asia. Japanese and South Korean industrial output was less than estimates in March and Taiwan’s first-quarter growth was half the forecast pace as weakness in global demand limits recoveries in Asian economies, reports showed yesterday.

Orders Slow

A gauge of new orders in China manufacturing fell to 51.7 from 52.3 in March, while an index of new export orders dropped to 48.6 from 50.9 and the reading on inventories of finished goods declined to 47.7 from 50.2, according to today’s data, based on a survey of businesses.

Chinese stocks fell to a four-month low before the three-day Labor Day holiday that ends today on concern that a slowdown will drag on earnings. Growth risks include weakness in export demand, property-market overheating, a surge in so-called shadow banking and the damping of consumption by President Xi Jinping’s campaign to rein in official spending.

The benchmark Shanghai Composite Index is down 11 percent from this year’s Feb. 6 high. The MSCI Asia Pacific Index of stocks fell 0.5 percent at 5:42 p.m. in Tokyo.

Australia’s S&P/ASX 200 Index dropped 0.5 percent at the close in Sydney, while copper for delivery in three months declined as much as 1.7 percent to $6,936.50 a metric ton on the London Metal Exchange and traded at $6,958.50 by 4:45 p.m. in Singapore.

Sustain Recovery

The decline in April’s index shows that the “foundation of an economic stabilization is still not solid,” Zhang Liqun, a researcher with the Development Research Center, an agency advising China’s cabinet, said in a statement. “The economic growth rate may fall slightly in the future, and China needs to stabilize domestic demand to make the economic recovery more sustainable.”

The world’s second-biggest economy expanded 7.7 percent in the first quarter, less than analysts’ forecasts and below the 7.9 percent pace in the final three months of last year. Growth in industrial companies’ profits slowed in March, an April 27 report showed.

The fourth quarter’s growth rebound “was an old fashioned one led by fast implementation of fiscal programs and accelerated investment,” said Liu Li-Gang, head of Greater China economics at Australia & New Zealand Banking Group Ltd. in Hong Kong. “Now the momentum has petered off as shown by recent slowing investment growth.”

Loosen Controls

China’s new government “must initiate a new round of reform programs to restart the sputtering economy” including plans for urbanization, reducing service-industry taxes and loosening controls on interest rates, Liu said in an e-mail.

Separately today, South Korean exports rose less than forecast in April, climbing 0.4 percent from a year earlier, while imports declined 0.5 percent, government data showed. In Indonesia, inflation slowed to 5.57 percent in April from a year earlier.

In the U.S., companies probably added 150,000 workers in April, less than the 158,000 recorded in March, economists forecast ahead of figures due today from the Roseland, New Jersey-based ADP Research Institute.

In January, the Chinese federation increased the number of companies in its survey to 3,000 from 820 and reclassified the industries covered into 21 groups from 31. It hasn’t given a further breakdown of respondents.

A purchasing managers’ index for large companies fell 0.4 point from March to 51, while a gauge for mid-sized enterprises rose 0.4 to 50.7 and a reading for small businesses dropped 1.7 to 47.6, according to the statistics bureau.

“China needs to cement its domestic economic growth momentum and guard against potential risks in financial sectors,” the Politburo Standing Committee said in an April 25 statement.

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