China: Trade tensions likely weighed on October growth – Standard Chartered

Official manufacturing PMI dropped to a six-month low of 49 amid increased trade uncertainty. Production activity likely normalized after the September jump; investment may have declined further. Front-loading of exports seems to have renewed; CPI likely declined m/m on lower food and oil prices. Loan and TSF growth likely slowed on subdued loan demand and narrowed government bond financing, Standard Chartered's economists report.

Renewed trade frictions may have dragged momentum

"The official manufacturing PMI fell to 49 in October, the same as April, when sky-high bilateral tariffs were imposed by the US and China. Production activity slowed, with the production PMI falling below 50 for the first time since April. Demand weakened; the new orders and new export orders PMIs dropped 0.9pts and 1.9pts to 48.8 and 45.9, respectively. The services PMI rose while construction activity declined further."

"Export growth likely stayed flat in October due to base effects; the 2Y CAGR may have picked up partly on renewed export front-loading activity to mitigate the risk of tariff re-escalation in November. Given the likely export drop, industrial production (IP) growth may have normalised after the September spike. Investment likely dropped further on a further decline in real estate investment and weaker investment appetite. Project construction may have been interrupted by the long holidays. Retail sales growth likely fell sharply partly on base effects and the fading impact of policy measures."

"CPI may have declined m/m on falling food and fuel prices, while core CPI likely remained stable. PPI may have risen m/m on higher coal and non-ferrous metal prices. Money and credit growth likely eased; we expect loan demand to have remained subdued amid increased uncertainty. Government bond financing narrowed as the remaining quota shrank after front-loaded issuance."