China Factory Gauge Falls From Initial Reading

A Chinese manufacturing gauge fell from an initial reading a week ago as a property slump weighs on the world’s second-largest economy.

The Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics for September was at 50.2, lower than the preliminary figure of 50.5 and unchanged from August. Numbers above 50 signal expansion. The Hang Seng Index in Hong Kong extended losses after the report.

Economists have cut estimates for this year’s gross domestic product growth after data on industrial profits, factory output and credit showed a deteriorating outlook. While the government has set an expansion target of about 7.5 percent for this year, Premier Li Keqiang and other policy makers have insisted for months they don’t need strong stimulus measures.

“The reading shows China’s economy is still biased toward weakening,” said Zhou Hao, a Shanghai-based economist at Australia & New Zealand Banking Group Ltd. “It’s quite clear that the central bank is reluctant to conduct any broad-based easing, and the economic weakness is likely to continue.”

One bright spot in data for August, export growth, was reflected in today’s report, which showed a stronger expansion of total new business, driven by the fastest rise in new export orders for 4 1/2 years. China’s trade surplus climbed to a record in August as exports rose on the back of increased shipments to the U.S. and Europe.

Today’s report marked the seventh straight month that the final PMI reading was below the preliminary figure, which is typically based on 85 percent to 90 percent of responses from the more than 420 companies surveyed.

Export Strength

Strength in external shipments is helping offset the drag from property: New-home prices fell in all except two of the 70 cities monitored by the government last month, the most since January 2011. A home-price expectation index among urban households declined in the third quarter, according to a report from Survey and Research Center for China Household Finance, which is based on a survey of 5,000 households.

A separate manufacturing index from the National Bureau of Statistics and China Federation of Logistics and Purchasing is scheduled to be published tomorrow. That figure declined to 51.1 in August from 51.7 in July. The median estimate for September’s figure of 31 economists surveyed by Bloomberg is 51.0.

A report this month showed the economy remained stuck in “low gear” this quarter. The China Beige Book survey of companies said growth in investment slowed further, borrowing costs rose and the share of firms applying for and getting bank loans remained at “rock bottom levels.”

— With assistance by Xin Zhou

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