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Macroeconomic indicators - China manufacturing may contract

Bloomberg reported that China manufacturing may shrink for a third month in September, the longest contraction since 2009 after a preliminary index of purchasing managers showed measures of export orders and output declined.

The reading of 49.4 for a manufacturing index released by HSBC Holdings Plc and Markit Economics compares with a final reading of 49.9 for August and 49.3 for July. The reading was below 50, the level that separates expansion from contraction in the eight months through March 2009, according to previously released figures.

This data adds to evidence the world second biggest economy is slowing after the central bank raised borrowing costs and curbed lending to cool inflation. China has joined policy makers in other Asian economies including South Korea and Malaysia in limiting monetary tightening as a deepening debt crisis in Europe and the risk of renewed recession in the US threaten to stall a global recovery.

Mr Chang Jian an economist at Barclays Capital in Hong Kong who formerly worked for the World Bank said “The index points to continued moderation in manufacturing growth. But the fact that the number is hovering around 50 should reduce concerns over a sharp slowdown and which would support the authorities in keeping their current policy stance largely in place.”

A gauge of output dropped below 50 in September after expanding the previous month, orders contracted at the same rate and a measure of new export orders contracted at a faster pace. Sub-indexes for output prices and input costs rose at a faster pace compared with August.

The preliminary index has matched the final reading twice since HSBC began publishing the series in February. The index fell below 50 in July for the first time in a year. The official manufacturing index released by the statistics bureau and the China Federation of Logistics and Purchasing had a reading of 50.9 in August.

A central bank survey last week showed inflation expectations among households rebounded in the third quarter even as August consumer-price gains eased to 6.2% from a three year high in July.

Signs are mixed on the outlook for the economy. While industrial output growth moderated in August for the second straight month, exports grew more than expected and imports climbed to a record indicating demand is holding up.