December early indicators show China slowed for a seventh month

December early indicators show China slowed for a seventh month

28/12/18, 07:11 am

BEIJING (Dec 28): China’s economy slowed for a seventh straight month in December, as the trade war, subdued domestic demand and decelerating factory inflation combined to undercut growth.

That’s the signal from a Bloomberg Economics gauge aggregating the earliest-available indicators on business conditions and market sentiment. The data suggest the government’s stimulus approach and the trade war truce with the US have yet to have much effect on the nation’s growth trajectory.

The data signals that activity is continuing to slow in China, with uncertainties in global trade and sluggish confidence still the major constraints, said David Qu, economist at Bloomberg Economics. "Recent fluctuation in the commodity market may further undermine manufacturing sector profitability," and we will be looking closely at what the government does to stabilize the economy in early 2019, he said.

China’s leadership last week pledged more support for the economy next year, indicating an increasing sense of concern in Beijing over the economy and stalling growth. Even with the current ceasefire for the trade war, there is still no guarantee that there will be a breakthrough before the start of March, when the current truce is set to end.

Official Data

The first official Chinese economic data for December, the purchasing managers indexes for the manufacturing and non-manufacturing sectors, will be released Monday morning in Beijing.

The manufacturing gauge will probably be unchanged at 50, the dividing line between expansion and contraction. Before November, the last time it was so low was mid-2016. The non-manufacturing gauge, which covers construction and services, is forecast to slip a tad, according to the Bloomberg survey.

China’s manufacturing companies are already under pressure with output growing at the slowest in a decade in November and factory inflation decelerating. If the current trade talks fail, higher US tariffs would further damage their prospects.

Outside the trade ceasefire, companies have had little good news to embrace. An index of business confidence among small and mid-sized enterprises maintained by Standard Chartered was unchanged at 54.7 in December, and the outlook is bleak as downward pressures continues to mount, according to Shen Lan, the Beijing-based economist in charge of the bank’s survey.

"Export demand weakened while domestic demand remained sluggish for SMEs in December," she said in a Dec. 24 report. The acceleration in production was driven mainly by the non-manufacturing and hi-tech industries, while manufacturing slowed further, she wrote. "Credit conditions generally improved in the fourth quarter, although they did not show further improvement in December."

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