China’s manufacturers slow in September as trade war worsens

Employees sort through strips of leather to be manufactured into belts at a factory in Guangzhou, China. (Bloomberg pic)

BEIJING: China’s official factory gauge slowed more than expected in September, while the index for services and construction unexpectedly picked up.

The manufacturing purchasing managers index stood at 50.8 in September versus 51.3 in August, lower than the median estimate of 51.2 in a Bloomberg survey of economists. The non-manufacturing PMI, picked up to 54.9, the statistics bureau said Sunday, gaining from 54.2 in August. Levels above 50 indicate expansion and below 50 mean contraction.

An alternative manufacturing PMI produced by Markit Economics will be published Sunday at 9.45am. That gauge has weakened in recent months even as the official measure has remained firm. The Markit sample is oriented more toward smaller and more export-oriented firms.

China has come under increasing pressure as the trade war with the US escalates and economic growth slows. President Donald Trump’s administration has now imposed tariffs on a total of US$250 billion of goods imported from China, while China has responded with higher levies on US$110 billion worth of American goods.

The gauge for new export manufacturing orders in the PMI report fell to 48, the fourth consecutive month in contraction and the lowest reading since 2016.

Bloomberg Economics’ early indicators on China’s economy showed growth continued slowing and sentiment deteriorated in September. The report gives a quick picture of what’s happening in China by aggregating the earliest-available indicators on business conditions and market sentiment.

That worsening follows on from a slowdown in industrial profit growth in August. Private companies fared worse than state-owned enterprises, but discrepancies in that data suggest that the picture for Chinese manufacturers may be worse than officially-reported growth rates show.

Officials have promised fiscal stimulus in the form of tax cuts and infrastructure spending to insulate the domestic economy from the effects of the trade dispute. Analysts also expect China’s central bank will continue topping up liquidity in the financial system to support economic growth.

“The trade war with the US has had a negative impact, but as China’s reliance on trade has declined, the influence is manageable overall,” said Wen Tao, an analyst with China Logistics Information Center, according to a statement on its website.