China’s Manufacturers Hang onto the Positive

Manufacturing Sector PMI Oct-18

China’s manufacturing sector remained marginally positive in October as it skates around the 50 mark for the second month in a row. May of 2017 was the last time in the past two years that the PMI was under-water at 49.6.

Zhengheng Zhong, director of macroeconomic analysis at CEBM Group commented, “Overall, expansion across the manufacturing sector was still weak. China’s economy has not seen obvious improvement.”  Source: Markit Economics

Since When is 6.5% Growth a Bad Thing?

Chinas GDP Q318

It’s a bad news – good news situation in China.  The bad news is that GDP for the third quarter of 2018 is lower than any quarter since the global financial crisis of 2009.  The good news is that the decline is to 6.5%.   Any Western economy would be considered over-heated if it was growing that fast. The US Federal Reserve would be raising interest rates every month to counter the inflationary threat. But this is China where 6.5% growth is slow.  The causes for the slow down are theorized to be the trade tensions with the US and excess borrowing by local governments. Sources: Trading Economics; National Bureau of Statistics, China

Non-Manufacturing Sector Delivers a Positive 3.1% Swing

Service Sector Oct-18

The outlook based on October’s survey of 400 non-manufacturing companies takes a positive jump well above the 13-month average of 52.8.  This is true, in spite of the inflation and consumer price numbers that have come out of the government in recent weeks.  This sector’s strong 3.1% turn shows that China’s economy is affected, but not overwhelmed, by the trade tensions that exist. Source: Markit Economics

Trade Tensions are Effecting China and the US Differently

Consumer Price Index - Sep-18

The steady climb over the last four months by the basket of goods and services that make up China’s Consumer Price Index is related to the steady rise in China’s inflation rate over the same period. There can be no doubt that the trade tensions between the US and China are having an effect on the general economy in China as they are disrupting the stock market in the US. Sources: www.Tradingeconomics.com; National Bureau of Statistics of China

China’s Mobile Consumer

Carrier Data Sept 2018

Another 12 million new mobile subscribers add their names to the rolls of China’s three major carriers.  This number out-distances the 12-month average gain of approximately 10.7 million and it highlights the utter emersion of Chinese consumers in their mobile world, a world in which modern advertising thrives.  Sources: China Mobile, China Unicom, China Telecom

September’s Food Inflation Spikes in China

China's Inflation Rate

Inflation in China ticked up for the fourth month in a row in September.  Food inflation was the driver behind a rate that more than doubled from August to September, going from 1.7% to 3.6%.  Food is the sub-sector that effects consumers most because its felt on a daily basis.  Meanwhile, September’s non-food inflation rate rose at a slightly slower rate than in August.  Still, the government had targeted a 3% rate of inflation keeping this move well within expectations.  Source: Trading Economics; National Bureau of Statistics, China

Entering Prime Time for China’s Retail Sales

Retail Sales - Sep-18

September moves into the highest three month retail sales environment of the Chinese year.  As expected, September pops up as the leading month of the year in anticipation of Singles Day, November 11th.  It’s the equivalent of Black Friday and Christmas combined. Expect October and November to follow September’s lead.  Though September outpaces the rest of the year, a look back to last September shows a significantly slower sales bump than might be expected.  Data from this month will be watched closely  Source: www. Tradingeconomics.com; National Bureau of Statistics of China

Choppy Waters

Consumer Confidence August-18

For the eight months prior to June, Consumer Confidence sat comfortably in the 120’s.  While for the three months through August the numbers have bounced up and down between 118.2 and 119.7. That reflects a change, though not a drastic change, in the consumer mind-set.  Note: Above 100 is considered positive territory, meaning that this slight reduction does not suggest a panicked Chinese population.   Sources: Tradingeconomics.com; Nat’l Bureau of Statistics, China

Manufacturer’s Look Downward

Manufacturers Index - sep18

As key underlying indicators respond to negative trade conditions – slowing new orders and falling exports – September’s Manufacturer’s PMI drops to 50, its lowest point in sixteen months.  This compares to its recent high of 51.6 back in February 2018.  The sequential decline in confidence since then is evident through the third quarter as output growth and buying activity slowed and employment rates dropped.   Though “both output charges and input costs both expanded at slower rates [they still] indicated that upward pressure on industrial product prices remained.”  Source: Markit Economics

Inflation Moves Up with Little Effect on Consumers, Yet

Inflation August -2018

The five month trend of slowly rising inflation continued in August.  The inflationary drivers were from categories with direct impact on Chinese consumers: food, clothing, rent, fuel & utilities, education, culture & recreation.  While the increases are notable they are also incremental, suggesting that they may have little immediate effect on purchasing patterns.  Meanwhile, the government’s target inflation for 2018 is 3% while the average since January – including the February spike – is only 1.9%, leaving lots of room.   Source: Trading Economics; National Bureau of Statistics, China