Thought for the day

China Growth Accelerates Again in December

Services SMI at 24-month high. Manufacturing still lagging.
Overall growth rising


 
Last updated: 3 July 2024
 
The Chinese economy is on the move again. Significant growth is evident in the Services sector. All-Services sector growth Indexes are positive. Confidence is high and the overall Sales Managers Services Sector Index is at a two year high.

China Services: Headline Sales Managers Index
Diffusion Index. (50 = 'No Growth')
China Growth Accelerates Again in December

The Manufacturing Sector is still lagging way behind Services, and parts of industry are still impacted by the after effects of Covid. But as the Services Sector is now accounts for about 53% of economic activity (up sharply on a decade ago) with Manufacturing way behind at only 28%, overall economic activity is clearly rising on the back of the buoyant Services sector.

The Services sector results from the latest Sales Managers Survey are very positive. The Sales Growth Index registered an Index value of 55.5 in December, indicating a rapid rise in activity over levels seen in November. The Sales Growth Index is also up at an 9 month high.

A recovery in Business Confidence is also evident in the Services sector, with the index at a 21-month high. The Job Index is also now comfortably positive indicating significant recruitment activity in the Services sector, another sign of increasing confidence.

Finally, the overall Services Index, which brings together the various readings from the individual indexes, is also reflecting significant growth, with the December reading at a two year high.

The Manufacturing survey results continue to suggest that the sector has problems, with a considerable number of companies still citing some Covid related supply problems. All growth related Indexes are at, or a little below, the important 50 Index level indicating at best a flatlining trajectory. There is one final piece of good news or bad news, depending on your inclination. Price inflation seems to be a thing of the past, with the Manufacturing Price Index remaining below the 50 "no growth" line. Optimists can read this as confirmation that the Covid related period of dangerously rapid price inflation is over, with the genie now firmly back in the bottle. Pessimists can start worrying that Japanese style price deflation is now looking far more likely, with all the dangers that portends. The World Economics view is that the real danger for developed country manufacturers is that the "China Price", is coming back, with Chinese manufacturers likely to be able to offer everything from EV's to solar panels at prices way below those of competitors.
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