China Sales Indexes Start Third Quarter Badly

Sharp falls in July in almost all China Indexes presage falling economic activity


 
The Sales Managers July Survey data reflects a further significant slowdown in economic growth. Covid related problems haven't gone away completely: no less than 42 % 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 if, as expected, the impact of Covid falls away sharply over the second half of 2023.


The Manufacturing indexes continue to show bigger falls in activity than Services sector data.

Business Confidence is down sharply in the Manufacturing sector, and is now at its lowest point for almost 4 years.

The Manufacturing Sales Growth Index is at its lowest reading in over 3 years. And even the staffing Index, normally a lagging indicator, is at a 14 month low.

The Services sector did little better, with almost all indexes now below the 50 "no growth" level.

Consequently the all sector indexes did little to lift the rather gloomy picture spelt out by the seperate sector data.

Overall the Chinese economy, seemingly set earlier in the year on a rapid resumption of growth, now looks to have - at best - faltered in its ambitions.

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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