China: Growth momentum softens again – Standard Chartered

Standard Chartered economists Hunter Chan and Shuang Ding argue that China’s July data likely showed weaker momentum, with official PMIs for manufacturing, services and construction all below 50 and at multi-year lows. They note resilient but easing trade and Industrial Production, softer Consumer Price Index (CPI) below 1% year-on-year, and still-high PPI. Base effects likely supported retail sales while Fixed-Asset Investment remained in contraction.

PMIs, trade and inflation signals

"The semiconductor sector likely continued to outperform and support China’s trade and production activity. The oil price moderation in June likely weighed on export and import prices in July, reflecting a one-month lag, but volume growth may have stayed resilient. Industrial production (IP) growth likely retreated from a seasonal jump in June but stayed solid."

"CPI inflation likely eased to 0.5% y/y in July, the first below-1% reading in six months, mainly on a m/m decline in food and fuel prices. While PPI likely dropped m/m on falling petrol-related product prices, headline inflation may have stayed at 4.1% y/y."

"Base effects likely helped to lift retail sales growth and keep the contraction in YTD fixed-asset investment (FAI) from worsening, while the 2Y CAGR likely eased. Adverse weather effects may have disrupted construction activity, weighing on infrastructure investment. In addition, real-estate investment may have remained a key drag."

"Overall loan demand likely remained weak, while corporate and government bond financing may have continued to support broad credit growth."

"China’s official manufacturing PMI dropped to 49.2 in July, entering contractionary territory again since March. The new orders PMI dropped deeper below 49, while the production and new export orders PMI remained relatively steady. In addition, the services and construction PMIs both dropped to multi-year lows, indicating softer domestic demand."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)