The first official gauge of China’s economy in November showed manufacturing activity continued to worsen, underscoring concerns about a slowing domestic economy and the uncertainty of what will happen in the trade war.
- The manufacturing purchasing managers index continued falling, dropping to the 50.0 level which marks the divide between expansion and contraction. New export orders improved slightly, though still contracting for a sixth month, while the non-manufacturing gauge, reflecting activity in the construction and services sectors, worsened to 53.4.
Key Insights
- The economy “isn’t at its bottom yet” and China is just halfway through the economic cycle, according to Larry Hu, a Hong Kong-based economist at Macquarie Securities Ltd. Policy has roughly reached the “inflection point”, where stimulus will be expanded, including a reduction in benchmark interest rates likely take place in the first quarter in 2019, he said on Bloomberg TV.
- “Economic support measures aren’t working and the private sector continues to struggle,” said Andrew Polk, co-founder of research firm Trivium China in Beijing. “On top of this, the domestic policy outlook is uncertain and the trade war hasn’t even really been felt yet. So there’s not much reason to be optimistic if you are a Chinese manufacturer.”
- Uncertainty from the trade war continues. Presidents Donald Trump and Xi Jinping are to meet on Saturday, and while Trump has indicated that a deal might be on the table, he has also threatened more tariffs if the talks don’t go well.
