China still slowing…

Via Capital Economics:

• The latest survey data suggest that China’s economy continued to come under pressure last month. We expect further weakness ahead despite the shift toward policy easing.
• The Caixin manufacturing PMI declined from 50.8 in July to a 14-month low of 50.6 in August. This was weaker than anticipated (both the Bloomberg median and our forecast were 50.7). The unofficial index is generally a better guide to cyclical trends than its official counterpart which was published on Friday and had hinted at a pick-up in growth that now looks less convincing. (See Chart 1.)
• Like the official PMI, the breakdown of the Caixin index points to stronger output but weaker new orders. (See Charts 2 & 3.) However, while the new export orders component of the former fell, it rose in the unofficial index, which suggests that the main drag on growth last month was weaker domestic demand.
(See Chart 4.) Certainly, the pick-up in Korea’s export growth last month suggests that China’s exports probably held up reasonably well in August despite additional US tariffs coming into force (the trade data
are due on Saturday).
• Stepping back, the PMIs have generally held up better during the past year or so than the China Activity Proxy – our in-house measure of GDP growth. (See Chart 1 again.) That said, both indicators are now clearly on a downward trajectory. This slowdown appears, on balance, to have continued last month, mostly likely on the back of a further deceleration in credit growth and infrastructure investment. And while the policy easing now underway should eventually put a floor beneath growth, the usual lags involved mean that growth will continue to cool heading into next year.