Chinese Manufacturer’s Bail Out in January

The precipitous -3.8% drop compared to November’s number is the largest decline we have seen since we’ve been watching and the lowest this Index has fallen since February of 2016.  Obviously, the trade wars have taken hold and are now affecting the judgment of purchasers in the manufacturing sector.  Index numbers below 50 are on the negative side for futures.  Notably, the January number for the Services sector, as reported last week, remianed at a healthy 53.3. Source: Markit Economics

China’s Economy is Down, but Not Out

The pattern through 2018 is now clear.  The Chinese GDP has declined 5.9% when compared to the fourth quarter of 2017.  Still it is an economy that is growing at a healthy rate in spite of the effects brought on by the trade turbulence. Sources: Trading Economics; National Bureau of Statistics, China

Price Pressure in China Receded in the Fourth Quarter

Late summer price pressure on inflation was relieved at the end of the year. But these days with all the other pressures on the Chinese economy – high debt, trade wars and such – that are working against increased growth, it’s not surprising that this positive is likely to have little effect.

 Source: www. Tradingeconomics.com; National Bureau of Statistics of China

Retail Sales in China Continue to Expand, but a 25% Slower Pace.

Though Chinese economics over the last four or five months have been under pressure because of the trade issues with the US, retail sales continue their long, long streak of month-over-month growth.  But another story is told when the numbers are viewed from a different vantage point.  Growth over the last quarter of 2018 was 25.3% lower than the growth in the same quarter quarter of 2017.  The effects of a slower economy are having an impact on the Chinese consumer.  Source: www. Tradingeconomics.com; National Bureau of Statistics of China

China’s Banner Year for Mobile Subscriptions

There’s been lots of talk about the decline in Apple’s phone sales in China, all related to the trade issues with the US.   That doesn’t mean that phones sales in China are down.  In fact, based on year-over-year mobile subscription levels, 2018 was a banner year. Subscriptions were up 33.7% in 2018 compared 2017.  

Lost Apple sales at the end of 2018 mean the company has lost millions of users to domestic, Android phone companies and they are likely to never get them back. Sources: China Mobile, China Unicom, China Telecom

Resistance on the Positive Side

Service Sector -Dec-18

All recent news on China’s economy has focused on a downturn in the manufacturing sector due to the trade difficulties with the US. Manufacturing used to dominate the Chinese economy, but that has changed in recent years. The service sector controls a larger share of the economy today. It’s more local and far less affected by international trade.  Hence, as long as the service sector and the Chinese consumer remain positive, the effect on the overall Chinese economy from the trade issues will be moderated.  Source: Markit Economics

China’s Service Sector Leaps Back in Rocky Three Month Ride

Service Sector -Dec-18

 

China’s service sector since July 2018 has been up and down, but the last three months have rocked reflecting the instability created by trade tensions with the US.  At no time in this period has the Index fallen below the 50-point positive threshold.  In December it sits comfortably above the 13-month average of 53.0.   Source: Markit Economics

Smart Device Subscriptions in China Approach 1.3 Billion

Carriers-November 2018

Based on data through November of 2018, the year in China will end with between 120 and 125,000,000 new smartphone subscriptions (read; advertising consumers).  What’s amazing about the number is that there are more smart devices than people in the country, yet five to ten million new subscribers are still found each month.  How many millions of flip phones remain in use?  Sources: China Mobile, China Unicom, China Telecom

China: Inflation Moderated in November

China Inflation - Nov-18

Inflation in China receded for the first time in the six months since June.  The shift is attributed to a decline in both food and non-food inflation.  Both gained, but not as much as expectations.  The pressure that six month of increases may have caused has been dissipated by November’s reduction making it appear that trade tensions have been absorbed for now.  Source: Trading Economics; National Bureau of Statistics, China

China’s PMI is Steady, but Weakening, for Now

Manufacturing PMI November-18

Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group, speaking about the Index for November notes that “China’s economy was weak, but did not show significant signs of deterioration.”  The weakness is attributed to the trade tensions with the US while the lack of overall deterioration may be an overhang from prior strength. December’s numbers will likely reflect continuing trade pressure and new events that would not have been factored into November.  Source: Markit Economics.