Mon. Dec 9th, 2019

China economy sees first manufacturing growth since April, but trade war still hammering exports

Factories in China displayed an improvement in the preceding month, with the official manufacturing purchasing managers’ index (PMI) for November reporting the first positive reading since April.

Following the six months where the burden of a declining domestic economy resulted in manufacturers struggling,  as well as a trade war with the US, the data Saturday brought will heave a sigh of relief in Beijing, who have been pressed to improve the economy.

The official manufacturing PMI for November was 50.2, indicating that factory owners regained some confidence as the final month of the decade approaches. This surpassed October’s reading of 49.3 and well above a prediction of 49.5 by folks at bloomberg. The PMI is a survey that gives an indication of the mood among China’s manufacturing base. A number greater than 50 suggest growth in that sector, while less than 50 means the opposite. Manufacturers have had a miserable time, with exports falling for more than 3 months straight.

Also released by the National Bureau of Statistics (NBS) on Saturday was the non-manufacturing PMI, which came in at 54.4. This again surpassed expectations, with the Bloomberg poll predicting 53.1. October’s reading was 52.8.

The composite PMI was 53.7 in November.

This would be considered a major reversal thanks to improvements in productions and orders. It is likely that China’s activity in its domestic economy which rose, was the biggest improvement this month.

Within the manufacturing PMI, the production subindex rose to 52.6 from 50.8 a month earlier. New orders were up to 51.3 from 49.6, while supplier delivery times were up from 50.5 from 50.1.

What remained in contraction though where new export orders at 48.8, from 47 in October.This would imply that even before May 2018, the start of the trade wars, it had remained negative. Raw material subindicies were still negative, probably meaning the negative effects of tariffs were still in place.

“The rebound of new export order subindex was related to the increase in overseas Christmas orders; the obvious recovery of the import subindex was mainly driven by domestic demand,” according to Zhao Qinghe, NBS senior statistician. He further added that because of outsiide uncertainties, the downturn pressure on the manufacturing sector was prevalent.

Extra challenges faced because of trade tensions were faced by the economies while geopolitical risks and policies would cast a shadow of doubt in them.

Although US officials and Chinese state media have made positive noises this week about the conclusion of a trade deal – as they do every week – a finished agreement remains elusive. It is understood that agricultural purchases and tariff removal remain the primary stumbling blocks to a The trade war has contributed in weakening investor sentiment and consumer confidence, resulting in a slump in global trade, which decreased by 1.3 per cent month-on-month in September, according to data released this week by the respected CPB Netherlands Bureau for Economic Policy Analysis.

Not much is expected from China’s economy for the next year at the very least, according to analysts.