Thought for the day

Chinese Economy Expands Rapidly in April

Services Sector Confidence, Market Growth and Staffing Levels all at 1 Year+ Highs


 
Last updated: 3 July 2024
 
The April Sales Managers Survey shows a continuation into the second Quarter of the rapid recovery of economic activity seen in Q1 2023. Covid related problems haven't entirely vanished: 37% of Chinese companies surveyed said they remained negatively impacted by Covid in one way or another, but the percentage is way down from the 55% recorded as recently as January.

The fact that so many companies are continuing to experience lingering problems from the Covid lockdowns, suggests that the rate of economic growth will probably have the space to expand faster as the impact of Covid disappears over Q2 and Q3.

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April data shows the Services sector leading the pack, with another month-on-month jump in the Sales Growth Index, down from the very high reading of 56.2 in March, but registering a nevertheless impressive 54.3 in April. All Service Sector growth related Indexes (except the Sales Growth Index, but as noted that remains at a high level) rose to one year+ highs in April, with the overall Sales managers Index up at a 13 month high; Business Confidence up to a 12 month high, the Market Growth Index at a 16 month high, and even the lagging Employment Index registering a 14 month high.

China Services: Staffing Levels Index
Diffusion Index: 50 = No Growth
Chinese Economy Expands Rapidly in April


Manufacturing is showing a somewhat slower recovery, as might be expected, but is not so far behind with the Sales Growth Index registering a healthy margin over the 50 "no growth" level.

Overall the Chinese economy looks set to resume the rapid economic growth it has enjoyed for most of the last four decades, although given the prospects for global growth in a world grown somewhat more suspicious of international trade, the absolute rate of growth it can achieve remains to be seen.

The data suggests there is little doubt that the Chinese economy isn't yet back to pre-Covid normality, but both Manufacturing and Services sectors are experiencing rising activity levels. Although it is early days to be sure of the precise prospects for the second quarter of 2023 , the April data does provide convincing evidence that China is recovering from Covid much faster than expected by most analysts.

In conclusion, the rapid changes made in Covid policy from early December by the Chinese Government do appear to be releasing a wave of long suppressed energy, despite the rather different international situation, and continuing supply problems associated with the long lock down period.
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