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ECONOMY: Downbeat numbers
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Downbeat numbers
By Morgan Brady

BT 201904 ECONOMY 01整体贸易数据变得更弱



今年中国经济可能放缓,并显示2019年的官方经济增长目标将为6%至6.5%。相比之下,2018年的增长率为6.6% - 这已经是中国自1990年以来增长最慢的增长速度。

BT 201904 ECONOMY 02China’s economic slowdown continues, as confirmed by data releases containing weak numbers. One of those releases was about international trade. Exports (USD denominated) in February declined by more than 20%, which is a large tumble compared with the expected 4.5% fall. Imports (USD denominated) also declined by 5.2%, in comparison with 1.4% fall expected. The total trade surplus was at $4.12 billion, which is much lower than the expected $26.38 billion.

China’s trade surplus shrinks
The trade surplus in February was also much lower than January’s trade surplus at $39.16. The worse-than-expected numbers confirm that the trade spat between the US and China is taking its toll on the Chinese economy. China’s trade surplus with the US shrank to $14.27 billion from $27.3 in February. At this point, the government needs to step up its effort to shore up economic growth.

In conjunction with the slowdown in China, the global economy has been showing signs of faltering growth as well. This may have contributed to the decline in China’s trade surplus. The weaker demand globally and domestically was a factor in the downbeat numbers. And, although China’s New Year’s public holidays, which usually occur in February, may have affected the numbers, analysts say that the performance is slowing down even after taking into account the seasonal distortions.

Given the multitude of factors behind the weak numbers, a resolution to the trade war may not provide the desired relief. However, many economists remain optimistic, as there are many ways to stimulate the economy and many ways for investors to approach the current market conditions. According to one Chinese official, growth rates this year will likely fall between 6% and 6.4%. Although these numbers signify expansion, it would be the slowest expansion for China since 1990.

BT 201904 ECONOMY 034Consumer prices grew at a decelerating rate
Consumer prices also showed a slowing growth in prices, as the consumer prices index showed a growth of 1.5% on an annual basis in February, which is the lowest growth rate in months on an annual basis. Consumer goods prices went up by 1.1%, the prices of services went up by 2.1%, the food prices went up by 0.7% and non-good items increased by 1.7%.

The biggest increase has been in healthcare prices, which grew by 2.8%, followed by education, culture, and recreation, which increased by 2.4%, then residence with growth of 2.2%, and clothing, which grew by 2%. Food, tobacco, and liquor grew by 1.2%. Transportation and communication costs contracted by 1.2% (minus).

BT 201904 ECONOMY 03Manufacturing purchasing managers index shrank
The manufacturing purchasing managers index continued its decline, reaching the point of 49.2. This is below 50 points, the level which separates expansion from contraction. The manufacturing index has been in the contraction territory since Dec 2018, and it has slowed down since January, where it printed a 49.5 reading.

BT 201904 ECONOMY 04Only large enterprises showed expansion
Looking at the breakdown of the index, it seems that large enterprises are the only ones that showed increase in their purchasing activities. The PMI of large-sized enterprises was 51.5%, 0.2 percentage point higher than last month, and was still higher than the 50-points threshold. The PMI of medium-sized enterprises and small-sized enterprises, on the other hand, were 46.9 and 45.3%, which were lower by 0.3% and 2.0% from last month respectively, and signified contraction, as they were below the 50-point threshold.

BT 201904 ECONOMY 05Breakdown of the PMI
The index has five components, which are: the new orders index, the index of production, main raw materials inventory index, employed person index, and supplier delivery time index. All components showed a contraction except for the new orders index, which was above the threshold at 50.6 and signified expansion in new orders. Other components showed readings of 49.5, 46.3, 47.5, and 49.8, respectively. All components, except for the new orders index, showed a decrease in activity from last month.

BT 201904 ECONOMY 06Conclusion
The Chinese economy has printed downbeat numbers, many of which are far below expectations. The numbers do not come as a surprise to many who were waiting for the economy to show signs of a slowdown because of the trade war. Yet, the talks between US and China seem to be positive, and there were many factors other than the trade war that affected the Chinese economy. Global demand is weakening due to slower global growth. The domestic market in China seems to be faltering, as well as seen in the consumer price index readings. Manufacturing activity is shrinking in medium and small size factories, although it seems to be growing in larger manufacturing entities. The services sector seems to have grown based on the relevant purchasing managers index. While the economy is showing signs of weakness, many analysts are still optimistic and believe that many tools can be used to stimulate the economy. Future economic data releases are yet to prove this.

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