More bad news than good news on the economy

The Main Point

Once again most indicators suggest the economy has not bottomed out yet. The government reaffirms intent to take prudent approach to stimulus but many expect another round of rate cuts and other measures.

Key Events

PMI falls to six and a half year low

  • The government’s official manufacturing PMI rose to 49.8 in September, up from August’s three-year low of 49.7
  • But the private PMI by Caixin/Markit revealed PMI fell to 47.2, a 6.5 year low and down from 47.3 in August
    • Unlike the government’s gauge that concentrates on large firms, Caixin’s survey focuses on smaller and medium-sized companies.
  • Official services PMI for September came in at 53.4, unchanged from August, while Caixin’s services index fell to a 14-month low of 50.5.

 

Trade very soft

  • Imports: Fell 13.8% from a year earlier, 10th consecutive monthly drop, reflecting lower global commodity prices and sluggish demand.

 

  • Exports: Fell 5.5 percent which dragged total exports 1.4 percent lower in dollar terms in the first eight months of the year

 

Deflation is still a problem

The producer price index (PPI) fell 5.9 per cent in August from the same period last year – its 42nd consecutive month of decline and the biggest drop since the depths of the global financial crisis in late 2009

 

Industrial profits fall most in 4 years

China’s industrial profits fell 8.8 per cent in August from a year earlier, largest drop in 4 years. Attributed to falling prices (deflation), lower investment returns, and the devaluation of the yuan.

 

Slowing investment growth

Growth in fixed-asset investment slowed to 10.9 percent in the first eight months of 2015 – the weakest pace in nearly 15 years,

 

Premier signals cautious approach to growth

  • Premier Li Keqiang ruled out using quantitative easing as a policy to help stimulate growth, instead pledging reform and more entrepreneurship.
  • Li said quantitative easing alone could not solve structural problems in economic growth and it would lead to negative and spillover effects.
  • Li also insisted China won’t see a hard landing in its economy,” he said.

Sources for this Story:  

China imports sink in August, shares rally but volumes dive

http://www.reuters.com/article/2015/09/08/us-china-economy-trade-idUSKCN0R809020150908

 

China’s Export Data Points to a Deepening Industrial Downturn

http://www.nytimes.com/2015/09/09/business/international/china-import-exports-economy-downturn.html?_r=0

 

China deflation fears grow as producer prices sink the most in 6 years

http://www.scmp.com/news/china/economy/article/1856880/rise-inflation-china-largely-due-higher-food-prices-says

 

Chinese Premier Li Keqiang rejects economic quick fix in favour of reform

http://www.scmp.com/news/china/economy/article/1856882/chinas-premier-rules-out-quantitative-easing-stimulate-slowing

 

China grabs unused funds to spend on new projects as growth slows

http://www.reuters.com/article/2015/09/14/us-markets-global-china-idUSKCN0RE0PL20150914

 

China’s industrial profits fall 8.8pc in biggest decline in four years

http://www.scmp.com/news/china/economy/article/1862252/chinas-industrial-profits-fall-88pc-biggest-decline-four-years

China Industrial Profits Fall Most Since 2011 as Growth Ebbs http://www.bloomberg.com/news/articles/2015-09-28/china-industrial-profits-fall-most-since-2011-as-economy-slumps

 

A tale of two China PMIs: Manufacturing still in contraction mode

http://www.cnbc.com/2015/09/30/chinas-official-september-factory-pmi-at-498-above-estimates-and-augusts-497-reading.html