Beware a Chinese Fall Stall
In July, when worries about China’s economic recovery were first beginning to percolate more widely, analysts fixated on a curious bit of language from the Politburo: the recovery was developing in a winding, “wave-like" manner. Nearly half a year later, that characterization is looking more and more apt. After a better third quarter, the first two key reads on China’s economy in October both landed with an audible thud.
A bad case of seasonal affective disorder may be partly to blame. But it’s still not a good sign for an economy that was supposed to finally be on the mend. And there are some worrying similarities with the economy’s surprise stall-out this spring.
The composite purchasing managers index—produced by the statistics bureau and combining data from factories and the services sector—declined to its lowest level this year, just above the 50-point level separating expansion from contraction. The separate manufacturing PMI from Caixin, released Wednesday, fell below the 50-point mark for the first time in three months. There are a few important caveats.
For one, the long, combined mid-autumn and Chinese National Day holidays—which happened to occur together this year and ran from the very end of September through early October—might very well have pulled some factory activity ahead into September. China’s statistics bureau asserted that seasonality was a factor in the factory PMI’s weakness. For another, the two surveys sent conflicting signals on exports: the official factory PMI showed new export orders falling faster, but Caixin’s survey had the decline moderating slightly, according to Goldman Sachs.
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