Thought for the day

China September Sales Indexes Reflect the Return of Price Inflation, and the Possible Return of Chinese Economic Growth


 
9 May 2024
 
The Sales Managers September survey suggests a significant pick-up in economic activity from the gloomy summer index results. The all sector Sales Growth Index in particular shows an increase to healthy 53.1 reading. Covid related supply problems still haven't gone away completely, but the percentage of companies reporting they are still affected in one way or another is way down ( at just over a third ) from the 55% recorded early in 2023.

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 August.

China Prices Charged Index: Services Sector
Diffusion Index. (50 = 'No Growth')
China September Sales Indexes Reflect the Return of Price Inflation, and the Possible Return of Chinese Economic Growth

The Services sector results, in contrast, are significantly more positive, with the overall Services Sector Index up again in the month, now standing at a very positive 54.0, a 5-month high.

Perhaps most important of the September results are the Price Index numbers. The Manufacturing Sales Managers Price Index still registered numbers below 50, although in September the Index rose to an 8 moth high at 49, indicating modest price falls over the month. But in the Services sector, a very different story is emerging, with the Services Price Index registering 53.2, a 22 month high. The All Sectors Price Index recorded a figure of 50.9, a 14 month high. This suggests fears of Chinese price deflation ushering in a Japanese style period of very low or negative growth have been overblown.

Given the shrinking prospects for global growth in a world grown more suspicious of international trade, and increasingly fettered by sanctions of one kind or another, predictions of GDP growth are of diminishing value.

But the signs of a resumption of growth in the worlds unquestioned no 1 Growth Engine over recent decades, are looking a little more positive.
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