China’s Economy Weakened in May, Early Data Show
Chinese policy makers have emphasised that the nation can withstand the impact of the worsening trade war.
(Bloomberg) -- China’s economic outlook deteriorated this month, after April’s weaker-than-expected performance combined with the renewed trade dispute to hit confidence.
That’s according to a Bloomberg Economics gauge aggregating the earliest available indicators of business conditions and market sentiment. Copper prices dropped as hopes faded for a quick resolution to the trade dispute, and South Korean exports fell for a fifth month. Sentiment among stock investors and small businesses also declined.
The official Purchasing Managers’ Index, which shows sentiment in industrial companies, is due for release on May 31. With the reading forecast to have fallen back below the 50 mark that signals contraction, policy makers may soon face greater pressure to roll out further stimulus measures to support the economy.
“The economy will see a broad weakening in May” with the big external shock of trade war escalation, said Wan Qian, an economist at Bloomberg Economics in Hong Kong. Exports and market sentiment have both been influenced by the rise in tariffs and containment of technology companies, she said, referring to moves to block Huawei Technologies Co. and other Chinese hi-tech companies from purchasing U.S. products or doing business there.
Chinese policy makers have this week emphasized that the nation can withstand the impact of the worsening trade war. However, small businesses already began to grow more cautious as soon as the higher tariffs were announced in early May, according to an index released by Standard Chartered Plc.
“The negative impact of the escalation of the U.S.-China trade conflict started to be felt soon after tariffs were raised,” Beijing-based Standard Chartered economist Shen Lan wrote in a note. “Exporters expect the tariff increase to materially affect their sales and production plans, as well as squeeze their profit margins.”
Conditions reported by sales managers also pointed to worrying signs in jobs and profitability, although the headline index edged up, according to London-based World Economics Ltd.
--With assistance from Alfred Cang.
To contact Bloomberg News staff for this story: Yinan Zhao in Beijing at yzhao300@bloomberg.net;Adrian Leung in Hong Kong at aleung206@bloomberg.net
To contact the editors responsible for this story: Jeffrey Black at jblack25@bloomberg.net, James Mayger
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