China’s Recovery Stabilized in June With Signs of Rebalancing

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China’s economy showed signs of more balanced expansion in June, with solid underlying growth momentum.

That’s the outlook of an aggregate index combining eight early indicators tracked by Bloomberg, which remained unchanged from May in expansionary territory. Although some economists cut their forecasts for 2021 after May’s data came in weaker than expected, the economy is still seen growing 8.5% this year, which would be the fastest in a decade.

China’s Recovery Stabilized in June With Signs of Rebalancing

Confidence among small and medium-sized enterprises was unchanged at the second-highest level since the Covid-19 outbreak, according to a survey of more than 500 companies by Standard Chartered Plc. The expectations sub-index picked up in June after falling in May, with the data pointing to improved expectations for new domestic orders, the report said.

“Domestically focused SMEs outperformed export-oriented SMEs for the first time this month since the second half of 2020,” Standard Chartered’s economists Shen Lan and Ding Shuang wrote in the report. “The sub-components showed that export orders saw a normalization, while domestic orders improved.”

The services industry continued its recovery following a boost from the Labor Day holiday and is catching up with the manufacturing sector, with export activity easing, they wrote.

China’s Recovery Stabilized in June With Signs of Rebalancing

South Korea exports, a barometer of global trade, rose at a slower pace in the first 20 days of the month from a year earlier, which might be an early sign that the days of outsize gains have passed. But this trade is still growing at a double-digit pace growth, as global vaccinations speed up and lockdowns ease in many places across the world.

Factory-gate inflation hit the highest level on record, according to Bloomberg’s tracker which comes out ahead of official data, with the commodity boom continuing to push input prices higher. However, a Bloomberg Economics analysis found that this month might be the peak, with price pressures on upstream sectors beginning to cool and inflation still contained in the downstream and consumer sectors.

China’s Recovery Stabilized in June With Signs of Rebalancing

The official purchasing manager indexes for industry will be released next week, and are expected to be basically unchanged from May, showing a steady expansion of demand.

Early Indicators

Bloomberg Economics generates the overall activity reading by aggregating a three-month weighted average of the monthly changes of eight indicators, which are based on business surveys or market prices.

  • Major onshore stocks: CSI 300 index of A-share stocks listed in Shanghai or Shenzhen (through market close on 25th of the month)
  • Total floor area of home sales in China’s four Tier-1 cities (Beijing, Shanghai, Guangzhou and Shenzhen)
  • Inventory of steel rebar, used for reinforcing in construction (in 10,000 metric tons). Falling inventory is a sign of rising demand
  • Copper prices: Spot price for refined copper in Shanghai market (yuan/metric ton)
  • South Korean exports: South Korean exports in the first 20 days of each month (year-on-year change)
  • Factory inflation tracker: Bloomberg Economics created tracker for Chinese producer prices (year-on-year change)
  • Small and medium-sized business confidence: Survey of companies conducted by Standard Chartered Plc
  • Passenger car sales: Monthly result calculated from the weekly average sales data released by the China Passenger Car Association

©2021 Bloomberg L.P.

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