Thought of the Day

The Chinese Economy Returns to Growth in May

Manufacturing still lacklustre although Confidence is rising.
Services are definitely on the move.

25 May 2024
The marked difference between the Chinese Services and Manufacturing sectors performance continues to remain in evidence.

But overall the latest May Sales Managers Survey shows the economy as a whole is now slowly waking up after its period in the doldrums.

Over the whole of the first quarter of 2024 the overall Manufacturing Sector Sales Managers Index remained below the crucial 50 index level, indicating declining output. In contrast the Services Sector overall Sales Managers Index remained at an average index reading over the first quarter of 52.4, indicating real growth in output.

The now dominant Services sector's resilience provided enough impetus to ensure that the combined Manufacturing + Services sector Index remained over the 50 no growth level, with a Quarter 1 reading of 50.9, indicating overall albeit modest growth in the Chinese economy.

The new Sales Managers survey results for May show the overall Manufacturing Sales Index now very close to the 50 "flatlining" level. This means that , despite falling prices keeping sales values relatively low ( the Sales Managers Prices Index remains well below 50 ), actual physical production is ramping up once more.

The Services Sector Sales Managers Survey results show a much brighter picture, with all growth related Indexes over the 50 level, and the crucial Business Confidence Index now at a level indicating significant belief among Sales Managers that both second and third quarters will see continuing growth.

Adding the two parts of the economy together to get an overall view of the State of China, the numbers start to look more in-line with official forecasts of 5% growth in 2024. Unless recent data has been in some way influenced by unseen forces (which seems unlikely - but this is China!) it appears that the Chinese economy may once again be poised to exceed market expectations.
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