"If the official PMI also slides, it will reinforce that further policy stimulus will be needed to hit the 7 percent GDP growth target."
- ING Group NV
Activity in the production sector of the world's second biggest economy slipped surprisingly in March of the current year, reaching its lowest point in 11 months. The Flash Purchasing Managers' Index, calculated by the HSBC Holdings Plc and Markit Economics, deteriorated to just 49.2 points for this month, while significantly missing analysts' expectations for 50.5 points. Moreover, the indicator declined from the previous month's 50.7 points. A reading below 50 points indicates a contraction of some particular industry. The report itself is based on responses of more than 400 manufacturers in China. At the same time, a negative result for the PMI Index was not the first this year. Earlier, disappointing numbers were posted by industrial production, investment and retail sales in China which all fell short of forecasts in January-February.
Economists are suggesting that such a pessimistic reading for activity in the manufacturing sector of Chinese economy, which accounts for more than 40% of GDP, will lead to more aggressive stimulus actions from country's government in order to maintain the pace of economic growth above 7% in 2015. Among those moves, officials may go further in terms of cutting interest rates and the reserve requirement ratio as soon as April.
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