China June Sales Survey Shows
Sharp Downturn in Growth


 
The Sales Managers June Survey data reflects a significant slowdown in economic growth. Covid related problems haven't gone away completely: no less than 43 % of Chinese companies surveyed said they remained negatively impacted by Covid in one way or another, but the percentage is way down from the 55% recorded as recently as January.

The fact that so many companies (particularly in manufacturing) are continuing to experience lingering problems from the Covid lockdowns isn't surprising (it takes time to rebuild supply chains in the manufacturing sector), and suggests that the rate of economic growth will probably have the space to expand faster as the impact of Covid falls away sharply over the second half of 2023.


The June overall Sales Managers Index data shows the Services sector still leading the pack, and still reflecting (very modest) growth at 50.4, compared with a fall in the Manufacturing SMI to below the 50 (no growth) level.

But all growth related Sales Indexes fell in June compared with April and May readings. Business confidence in the near future, and the Sales Growth Indexes have both been particularly badly impacted by what was clearly poor month for sales growth.

Overall the Chinese economy, seemingly set over the past few months on a rapid resumption of growth, looks to have experienced a temporary setback. 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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