Chinese yuan banknotes and coins sit in a drawer in Shanghai, China (Photographer: Qilai Shen/Bloomberg)  

Earliest China Data Signal Growth Intact at Slightly Weaker Pace

(Bloomberg) -- China’s economy showed slight signs of moderation in April as trade tensions continued to add uncertainty to the outlook.

Sales managers indicate growth lost some momentum, a satellite gauge of manufacturing edged down to the lowest level of this year, and one survey shows trade war talk weighing on expectations for the next 12 months. Even so, steel industry sentiment is the best in two years as construction resumes after winter.

That’s happening as leaders signal they may tweak policy if trade or financial risks threaten a sharp deceleration and the central bank directs lenders to steer more credit to small firms to help cash-starved sectors. Meanwhile, U.S. President Donald Trump is sending top economic deputies to China in hopes of a quick trade deal, a move that may cool tensions.

The official factory gauge probably edged down in April to a reading just shy of the March level, according to economists surveyed by Bloomberg ahead of the report on Monday. Full-year growth estimates are holding firm, with economists projecting expansion will slow to 6.5 percent this year, in line with the government’s target, from 6.9 percent last year.

Here’s what private indicators show:

Sales Managers

A gauge of sentiment among sales managers fell to 51.7 in April, according to a survey by London-based World Economics Ltd. Readings above 50 signal conditions are improving.

“After a strong first quarter where we saw steady to rising growth, April has seen it tail off a little but not worryingly so,” Chief Executive Ed Jones wrote in a report. “A drop in prices charged has been most significant but this could be a consequence of slightly slower sales growth and the possibility of a trade war breaking out with the U.S.”

Industrial Indicator

Factory activity moderated, according to China Satellite Manufacturing Index, which slipped to 51.1 from 51.7 in March. The gauge published by New York-based SpaceKnow Inc. tracks commercial satellite imagery to gauge activity levels across thousands of industrial sites.

Financial Experts

Financial professionals are upbeat on the economy, but the outlook has further deteriorated amid trade tensions, according to the China Economic Panel, a project of the Centre for European Economic Research in Mannheim, Germany, and Fudan University in Shanghai.

The panel said its main indicator dropped to minus 1 from 1.4 in March. A sub-index of expectations for export growth slumped, and respondents expect a considerable drop in shipments, Michael Schroeder, a senior researcher at the center, wrote in the report.

“Survey results were significantly impacted by international political discussion concerning trade barriers, tariffs, and the looming trade war between the U.S. and China,” he wrote.

Steel Strength

The S&P Global Platts China Steel Sentiment Index rose to a 25-month high of 82.78 points out of 100, up from 69.09 in March, on more orders and production. The gauge is based on a survey of about 75 to 90 China-based market participants including traders and steel mills.

“April is a seasonally strong time for steel demand and prices as construction work picks up again in spring,” Paul Bartholomew, senior managing editor for steel and raw materials at S&P in Melbourne, wrote in a report. “The situation is compounded this year due to pent-up demand after the winter constrictions on steel production and construction work.”

Small Companies

Standard Chartered Plc’s Small and Medium Enterprise Confidence Index moderated to 58 in April from a one-year high of 59.1 in March, dragged lower by a slight deterioration in the outlook for the economy, according to the survey of hundreds of companies nationwide.

Growth is expected to decelerate for the rest the year on slower investment growth, deleveraging, and intensifying trade friction with the U.S., Shen Lan, economist at StanChart in Beijing, wrote in the report. “A drastic weakening of the Chinese yuan will be used only as a last resort in a trade war scenario,” she said.

©2018 Bloomberg L.P.

With assistance from Yinan Zhao

Bloomberg
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