China Leading Index Rose 0.8% in April, Same as March

A leading index for China rose at the same pace in April as the prior month, offering investors some comfort that the world’s second-biggest economy may avoid a deeper slowdown.

The gauge increased 0.8 percent from March to 232.4, the New York-based Conference Board said in an e-mailed statement today, citing a preliminary reading. That compares with a 0.8 percent gain in March and 1 percent in February.

Wen Jiabao’s government may announce stimulus measures in the near term, the official China Securities Journal said yesterday, a day after the premier pledged to focus more on bolstering growth. Morgan Stanley yesterday joined banks including Goldman Sachs Group Inc. and Citigroup Inc. that have pared estimates for expansion this year after lower-than-forecast trade, industrial output and lending data for April.

“We are sort of waiting for some of these loosening policies to filter through into the real economy before we feel comfortable that there is a broad-based expansion over the second half of the year,” Andrew Polk, the Conference Board’s resident economist in Beijing, said today in a Bloomberg Television interview.

Indicators in manufacturing and real estate showed“significant slowing” in April, while bank loans and consumer sentiment were stronger, the Conference Board said.

More efforts should be made to maintain relatively fast economic expansion, Wen told said during a visit to Wuhan in central Hubei province, the official Xinhua News Agency reported May 20. While current economic operations are generally stable and growth is still within the expected range, the domestic and external environments are becoming more complex, Wen said.

Growth Concerns

The premier’s remarks suggest “the Chinese government now is seriously concerned about growth and is ready to introduce further measures to bolster growth,” Lu Ting, a Hong Kong-based economist at Bank of America Corp., said in a note yesterday.

Morgan Stanley economists led by Hong Kong-based Helen Qiao yesterday lowered their forecast for China’s growth this year to 8.5 percent from 9 percent. They said they also expect the central bank to cut benchmark lending and deposit rates twice this year by 25 basis points each time.

The economy may expand 7.9 percent this quarter from a year earlier, according to a Bloomberg News survey conducted May 14 to 15. That would be the sixth quarterly deceleration after an 8.1 percent expansion in the first three months of this year. The median estimate in a survey of 22 economists was for full-year expansion of 8.2 percent.

The central bank on May 12 cut the amount of deposits that lenders must set aside as reserves for the third time in six months to spur credit and bolster growth. The reserve-requirement ratio may be lowered three more times this year, Bank of America’s Lu forecasts.

The Leading Economic Index, first published in May 2010, has successfully captured turning points in China’s economic cycles if plotted back to 1986, the Conference Board says.

The index’s components include loans, a gauge of raw-material supplies, export orders, consumer expectations and floor space started, using data released by the central bank and the National Statistics Bureau.

The research group said in January it made benchmark revisions to the index and started releasing the index for the previous month instead of with the prior two-month lag.