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Fast Comment ChinaPMI uptick too small to change picture of slowing growth

  1. Both manufacturing PMIs increased somewhat…
  2. …but remain below 50
  3. Only a trade deal can stop growth from falling
Both manufacturing PMIs increased somewhat…
Manufacturing PMI from Markit increased to 49.9 in July from 49.4 in June, in line with the official manufacturing PMI which increased to 49.7 from 49.4. Both outcomes were slightly better than expected by consensus.
…but remain below 50
The uptick follows three months of sharp declines, and the stabilisation of manufacturing confidence is likely a consequence of the authorities’ economic stimuli. The resumption of trade talks with the US might also have diminished manufacturers’ pessimism. Still, both PMIs remain below the 50 threshold and the uptick is not enough to convince us that economic growth has stopped slowing.
Only a trade deal can stop growth from falling
In our view, growth will only increase again if some sort of trade deal is agreed upon. Further economic stimuli are likely to be announced but these will only mitigate, and not completely counter, the impact of the trade war and the slowdown in structural growth.


Disclaimer

Bjarke Roed-Frederiksen

Senior Economist

Latin America and China

bjro03@handelsbanken.dk

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