"The economy will need more policy support to pull out of its extended period of weakness," Bloomberg Economics's Chang Shu and Eric Zhu wrote in a note. "Government spending will have to remain the key lever to lift aggregate demand when private demand is not forthcoming - and the pace needs to accelerate."
Goldman Sachs Group Inc. economists including Yuting Yang and Andrew Tilton pointed out that both the input-cost and output prices sub indexes declined in August. "Price indicators in the NBS manufacturing survey suggest deflationary pressures picked up significantly," they said.
Economists at banks including UBS Group AG and JPMorgan Chase & Co. expect China to fall short of delivering on its growth target, while others are calling for increased stimulus to boost sentiment.
Factory activity contracted for a fourth straight month in August, with sub indexes showing deepening deflationary pressures, according to data on Saturday. Meantime, the latest sales figures showed that the residential slump deepened as expectations of a further drop in new-home prices hampered efforts to cushion the downturn.
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