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Fast Comment ChinaManufacturing PMIs fall another month

  1. Trade tensions starting to bite
  2. Change of economic policy tide
Trade tensions starting to bite
The manufacturing PMI from Markit fell to 50.8 in July from 51.0 in June, whereas the official manufacturing PMI fell to 51.2 from 51.5 in June. Both outcomes were marginally weaker than expected by consensus. Both indicators also fell last month and the direction - now clearly downward - is in line with the slowing of overall growth in China’s economy. The sub-index for new export orders was unchanged in the official reading but fell somewhat from an already low 48.8 to 48.4 in July. This suggests some negative impact on exporters’ sentiment from Trump’s 25 percent tariff on selected US imports from China that took effect on July 6, even though exporters are supported by the recent weakening of the CNY.
Change of economic policy tide
We see growth continuing to slow ahead amid trade tensions and past deleveraging efforts still impacting negatively. However, the tide for economic policy has changed recently with clear signals from China’s authorities that both fiscal and monetary policy are being loosened rather than tightened now. Not least, signals that the effort to reign in financial risks and dampen shadow banking activities will be weakened somewhat is good news for credit growth down the road, which with the usual lag will start to support overall economic growth late this year and into 2019.


Bjarke Roed-Frederiksen

Senior Economist

Latin America and China

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