The impact of the trade war between the US and China is now having a visible impact on the Chinese manufacturing sector according to the latest data. The Caixin China General Manufacturing PMI printed a 1china manufacturing6-month low of 50 in September, down from 50.6 in the prior month and missing market expectations of 50.5.
Data Breakdown Highlights Issues For PBoC
While the indicator is still just about clinging to expansionary territory, the readings are moving lower, signaling a clear contraction in activity with employment contracting at its quickest pace in 14 months and new export business seeing its biggest fall since 2016.
Furthermore, weakness in the demand environment saw subdued buying and inventory activity alongside businesses expressing their year-to-date lowest level of optimism for the 12 month outlook.
The breakdown of the PMIs makes very poor reading for China bulls with business confidence down to 50.8 from a prior 51.3 and new orders down to 52.2 from a prior 52.3.
Further PBoC Action Likely
These readings will be especially troubling for the PBoC which continues to try and backstop the economy amidst the ongoing trade war via further reserve requirement ration (RRR) cuts. With the US drawing up plans to unleash a further, more punishing round of tariffs, the economic situation in China is looking vulnerable and the prospect of further PBoC action grows increasingly likely.