China August Sales Indexes Show a
Modest Recovery in Economic Activity


 
The Sales Managers August Survey suggests a pick-up in economic activity from the gloomy July survey results. The Sales Growth Index in particular shows a significant bounce back from the virtually static July month-on-month numbers. Covid related supply problems still haven't gone away completely, but the percentage of companies still affected in one way or another, at 37%, is way down from the 55% recorded as recently as January.

The Manufacturing survey results continue to suggest that the sector is at best flat-lining. The Sales Managers Manufacturing Index remains below the 50 "no growth" line, although showing an improvement over July. The Services sector results, in contrast, are significantly more positive, with the overall Services sector Index up over two points in the month compared with July and now reading 51.1.


Perhaps most important of the August results are the Prices Charged Index numbers. Both for Manufacturing and Services, the Sales Managers Price Indexes registered numbers below 50, indicating significant price falls over the month. Whether this is an indication of coming price deflation, or more simply a return to more normal numbers following the shortages induced by both Covid and the Russian invasion of Ukraine remains to be seen. Given the fact that the Sales Managers Survey shows Covid related shortages still appear to be impacting on over a third of Chinese companies, we incline towards the latter explanation. But it is impossible to be sure of the reasons for this apparently deflationary change, which is in marked contrast to the situation in the USA, where prices continue to rise rapidly, and inflation linked worries persist.

Given the shrinking prospects for global growth in a world grown more suspicious of international trade, the absolute rate of growth achievable in the remainder of 2023 remains difficult to predict.

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