Leading indicators for China’s economy show growth continued to slow in September amid the escalating trade war with the US.
BEIJING — Leading indicators for China’s economy show growth continued slowing in September amid the escalating trade war with the US.
The data suggest the dispute was weighing on economic activity even before the latest round of tariffs, which took effect this week. That’s the takeaway from a Bloomberg Economics gauge aggregating the earliest-available indicators on business conditions and market sentiment.
Policy makers have taken steps to insulate the economy from deterioration in the external environment.
“The early indicators point to further weakness in the Chinese economy even before the latest round of the US tariffs took effect,” Bloomberg chief Asia economist Chang Shu said. “The government measures to support growth have not yet had visible effects so far.”
During a September 25 press briefing in Beijing where officials presented an 81-page white paper blasting US President Donald Trump’s trade policies, National Development and Reform Commission Vice Minister Lian Weiliang told reporters “China is fully capable of hedging the impact by expanding domestic demand” through a variety of measures including tax cuts and infrastructure spending.
The first official data for September, the purchasing managers indexes for the manufacturing and services sectors, will be released on Sunday at 9.00am. Both will decline slightly, according to forecasters surveyed by Bloomberg. The official manufacturing PMI reading unexpectedly picked up slightly in August, with analysts saying that the mere announcement of government stimulus had helped stabilise sentiment.
External demand conditions though continued to deteriorate this month as the political situation worsened. A weighted average of the flash PMI readings of China’s major trading partners including the US, the European Union and Japan declined in September for the fifth straight month, bringing the measure to its lowest level in over a year. That said, PMI readings in many major trading partners remain firmly in expansion territory, showing that demand is far from collapsing.
Factory inflation also moderated — for the third month in a row, to the lowest level since April, according to Bloomberg calculations.
The stabilisation in financial markets this month “likely reflects optimism about additional fiscal spending,” Citigroup analysts led by Dirk Willer wrote in report published on Friday. “However, we recognise that the magnitude of stimulus is moderate compared to previous cycles, and that the goal to control macro leverage remains intact,” they said.
“We thus believe that the risk of growth overshoot on the upside is limited.” —