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Fast Comment ChinaManufacturing confidence plunges again

  1. Trade war hitting confidence
  2. Not enough stimuli to offset negative trade war impact
Trade war hitting confidence
The official manufacturing PMI fell more than expected, from 50.8 in September to 50.2 in October, close to the threshold for expansion versus contraction. Manufacturing PMI from Markit dropped to 50.0 already in September but rebounded marginally to 50.1 in October. The drop in sentiment among manufacturers very likely reflects the escalating trade war with the US. This is emphasised by the fact that the sub-index in the official PMI for new export orders fell dramatically another month, from 48.0 to only 46.9.
Not enough stimuli to offset negative trade war impact
The authorities have already reacted to the weaknesses and have promised tax cuts and infrastructure investments, but the effect has yet to been seen. We expect more stimuli including looser monetary policy ahead to mitigate the fallout from the trade war and past deleveraging efforts.


Source: Macrobond



Bjarke Roed-Frederiksen

Senior Economist

Latin America and China

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