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Fast Comment ChinaTrade war hurting manufacturing confidence

  1. Both manufacturing PMIs dropped in September
  2. Not enough stimuli to offset negative trade war impact
Both manufacturing PMIs dropped in September
The official manufacturing PMI fell from 51.3 in August to 50.8 in September. The manufacturing PMI from Markit fell from 50.6 to 50.0, the threshold for expansion vs contraction. Both indices fell more than expected. The drop in sentiment among manufacturers very likely reflects the escalating trade war with the US. This is emphasised by the fact that the two sub-indices for new export orders fell dramatically with the official one plunging from 49.3 to only 48.0.
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. Infrastructure investments primarily support sentiment among the big state-owned firms, which are heavier represented in the official PMI than in Markit’s gauge. It is therefore not assuring that also the official sentiment gauge dropped. We expect more stimuli including looser monetary policy ahead to mitigate the fallout from the trade war and past deleveraging efforts.


Bjarke Roed-Frederiksen

Senior Economist

Latin America and China

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