China: IP growth likely edged down in August – Standard Chartered

The official manufacturing PMI edged down to a six-month low of 49.1 in August on weaker demand. IP growth may have slowed sharply to 4% y/y; export growth likely accelerated partly due to base effects. Policy measures likely supported equipment investment and consumer goods retail sales. PPI deflation may have accelerated on subdued demand; CPI inflation likely picked up on food prices, Standard Chartered macro analysts Hunter Chan and Shuang Ding note.

Growth momentum turns softer  

“The official manufacturing PMI edged down further to 49.1 in August from 49.4 in July, marking the lowest reading since February. The production PMI fell below 50 for the first time since February as new orders continued to decline. Industrial production (IP) growth may have edged down to 4% y/y in August from 5.1% in July. That said, external demand likely remained relatively stable. The new export orders PMI improved 0.2pts to 48.7.”

“The services PMI improved 0.2pts to 50.2 on better transport, sports and entertainment activity in August, while capital market, real estate and residential services performance declined. Retail sales growth likely rebounded seasonally to 4% y/y from 2.7% in July. Fixed asset investment (FAI) YTD growth may have remained stable. While we think equipment investment growth was resilient in August, infrastructure investment likely remained soft. Moreover, real estate investment may have contracted further.”

“We expect CPI inflation to have inched up 0.1ppts to 0.6% y/y in August on higher pork and vegetable prices. PPI deflation likely intensified to 1.4% y/y as metal and construction material prices fell amid softer demand. We expect total social financing (TSF) growth to have stayed at 8.2% y/y on a seasonal recovery in new CNY loans and accelerated issuance of government bonds.”