Amidst the escalation of the trade war with the United States, China’s manufacturing growth slowed for the month of October according to government statistics which is the second consecutive month of decline.
While analysts and experts expected the manufacturing Purchasing Managers’ Index (PMI) to for the country to be around 50.6, official data showed it was 50.2. in September, the official manufacturing PMI was 50.8.
There was also a drop in the production and new orders sub-indices in October compared to a month ago and the official PMI reading for October was the lowest since July 2016. There was also contraction for the fifth straight month in new export orders.
According to economists, a reading of such indices above 50 reflects expansion, while a reading below 50 is a sign of a slowdown.
The first full month after the complete implementation of the latest U.S. tariffs was October. Additional tariffs on each others’ goods were slapped by the United States and China on Sept. 24.
Analysts and investors across the world are keeping a very close watch on the economic data emerging from China to gauge the actual impact of the trade war with the US on the second largest economy of the world.
Manufacturing activity in China in October was weighed down by long national public holidays and a “complex and variable external environment” that resulted in “fluctuations” in demand and supply, wrote Chinese statistics bureau statistician Zhao Qinghe in an analysis note of the most recent data.
The official PMI for services also dropped from 54.9 in September to 53.9 in October.
Many exporters were pushing to make as much shipping of goods as possible before the setting in of the American tariffs on their goods, said analysts even though the economic data that so far this year has emerged out of China have shown signs that the economy is holding up despite the trade dispute with the U.S.
Citing factors such as seasonal slow down in industrial activity and the long Lunar New Year holidays which would be celebrated in February, Hao Hong, head of research and chief strategist at Bank of Communications, predicted that it is likely that the weakness in the Chinese economic activity would continue into winter.
Already, for the third quarter of the current year, a slower than expected growth rate of 6.5 per cent was reported for the Chinese economy which is the lowest growth rate for the economy since the first quarter of 2009.
The Chinese economy was already showing signs of a slowdown following three decades of blockbuster growth – pushing the Chinese government to take corrective measures, even before the escalation of the trade tensions with the U.S. this year.
Those efforts to boost the Chinese are now being complicated by the trade war with the U.S. and analysts are now anticipating Beijing to put in strategies of policy easing ot boost the economy as well as to counter the threats from the trade war.
(Adapted from CNBC.com)