BEIJING - The preliminary HSBC Purchasing Managers' Index (PMI) was 48.8 in January, a third consecutive reading below 50, indicating a slowdown.

That indicates a persistent weakness in the manufacturing sector that may invoke an easing of the government's tight monetary policy.

HSBC Holdings Plc said that the contraction in manufacturing production is likely to continue in the first few months of this year, indicated by continued declines in output and new-order indices.

A sub-index of output, as yet unpublished, is expected to decline to a two-month low of 47 from the 49.4 seen in December.

The PMI is a measure that shows operating conditions in the manufacturing industry. A reading below 50 means contraction, while one above that figure indicates expansion. The number was 48.7 in December and 47.7 in November.

"It shows that economic growth is likely to moderate further," said Qu Hongbin, chief China economist and co-head of Asian economic research at HSBC.

Although in December, data from the National Bureau of Statistics (NBS) showed that the year-on-year growth in industrial production rebounded slightly to 12.8 percent from 12.4 percent in November, "the ongoing slowdown in investment and exports implies more barriers to growth", Qu said.

The contraction in manufacturing followed a sharp drop in GDP to a three-year low, on a quarterly basis, of 8.9 percent in the last quarter of 2011, dragging full-year economic growth down to 9.2 percent from 10.4 percent recorded in 2010, according to the NBS.

"The first three months may be the bottom of growth momentum," said Stephen Green, chief economist with Standard Chartered Bank PLC.

However, a contraction in manufacturing may raise the possibility that the slowdown is likely to continue into the second quarter, he said.

On Wednesday, the Washington-based World Bank downgraded its estimate of the world's second-largest economy to 8.4 percent in 2012 from a previous estimate of 8.6 percent, because of weakening exports as European countries experience economic recession and the ongoing sovereign debt crisis.

Standard Chartered's Green predicted that a further slowdown in investment will drag on the growth of industrial production in the January-to-March period and exports may continue to weaken. "Under these circumstances, more monetary loosening will come, but only slowly," he said.

Wang Tao, an economist at UBS AG, wrote in a research note that the policy objective has clearly changed to support growth - indicated by a rebound in bank lending at the end 2011 - as inflation falls and growth slows.

"In 2012, we expect the government to increase bank lending by at least 8 trillion yuan ($1.27 trillion), likely to be supported by two or three additional cuts of the reserve-requirement ratios (for lenders)," Wang said.