China’s economy which began to soften at the end of last year is showing more signs of a slowdown, with economists arguing that growth in the first quarter might fail to meet the government’s annual target of 7.5 percent.

The latest evidence was found in the HSBC’s preliminary manufacturing purchasing managers’ index (PMI), which was one of the earliest available indicators of the manufacturing sector’s operating conditions in China.

The HSBC/Markit China flash manufacturing PMI for March dipped to an eight-month low of 48.1 from a final reading of 48.5 in February, said data company Markit in a statement on Monday.

It meant that manufacturing activity contracted for the third month in a row in March.

According to Markit, data was collected between March 12 and March 20. March’s final PMI data will be released on April 1.

PMI above 50 indicates expansion and below 50, contraction.

January saw HSBC China manufacturing PMI dipping to 49.5 from 50.5 in December, the first deterioration of operating conditions in the country’s manufacturing sector since July 2013.

In March, almost all sub-indexes fell, including output, new orders, employment, backlogs of work, output prices and stocks of purchases.

New orders fell sharply to 46.9 from 48.6. Output declined to 47.3 from 48.8. In contrast, finished goods inventory rose to 51.2 from 50.1.

The encouraging news came from the sub-index for new export orders, which climbed over the 50-mark for the first time in four months.

Commenting on the figure, HSBC’s chief China economist Qu Hongbin said March’s flash reading suggested the country’s growth momentum continued to slow down, and weakness was broadly-based with domestic demand softening further.

“We expect Beijing to launch a series of policy measures to stabilize growth. Likely options include lowering entry barriers for private investment; targeted spending on subways, air cleaning and public housing, and guiding lending rates lower,” Qu said.

Zhang Zhiwei, chief China economist with Japan’s Nomura Securities, said the decline in the flash HSBC PMI surprised the market since consensus stood at 48.7.

The positive market expectations were likely due to the seasonal effect and the rebound of another economic indicator — the MNI business sentiment index — to 53.4 in March from 50.2 in February.

In addition, the HSBC PMI has risen by an average 0.6 percentage points from February to March since data became available in 2005 (excluding 2009 due to the global financial crisis). It only fell in two out of the eight years — in 2007 and 2012 — since 2005, Zhang said.

“We maintain our view that growth momentum will slow in the first half of the year, and policy easing will pick up in the second quarter,” he said in a research note.

Zhang also maintained that China is likely to cut the reserve requirement ratio twice in the coming quarters. Fiscal policy will also likely become expansionary in the second quarter to keep GDP growth from dropping below 7 percent.

Nomura forecasts that China’s economic growth could slow down to 7.3 percent in the first quarter and further to 7.1 percent in the second quarter, lower than the government’s annual expansion target and the 7.7-percent growth in the last quarter of 2013, according to Zhang.

Qu Hongbin also said March’s PMI reading indicated that growth in the first quarter could probably be below 7.5 percent, and could even challenge the 7-percent “growth floor” and hit the job market.

In an earlier research note, Qu said almost all economic figures released so far this year were weaker than market consensus.

The HSBC manufacturing PMI for February was 48.5, but the average reading for January to February came in at 49.0. This suggests that China’s manufacturing sector is losing momentum, and the official manufacturing PMI repeated the same message, he said.

Qu said China’s external demand has also been erratic. On the domestic front, industrial production, fixed asset investment and retail sales data for the first two months were all weaker than forecasted.

“This calls for immediate policy action to put a floor on the growth slowdown,” Qu argued.