China PMI Shows More Trouble as Trade War Broadens

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The carefully followed Caixin China General Manufacturing PMI showed trouble in the sector as the trade war with the United States expanded.

The authors reported:

The headline seasonally adjusted Purchasing Managers’ Index™ (PMI™) – a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy – registered 50.2 in May, unchanged from the previous month, to signal a further marginal improvement in the health of China’s manufacturing sector. The headline PMI has now posted above the neutral 50.0 level in each of the past three months.

However, and probably more important:

Business confidence slipped to the lowest level since the series began in April 2012 in May amid concerns of an escalating China-US trade war and forecasts of relatively subdued global demand.

Leaders in the sector clearly expect that the effects of the trade wars will bite the economy and certainly their sector.

There have been growing concerns that the trade war will start to undermine GDP growth in both the United States and China. This, in turn, would trigger a global slowdown. Gross domestic product growth has not slipped below 6% in China in recent memory. That is now a real possibility.

Data on the U.S. economy is out soon. The jobs numbers will be released in a matter of days. They also will demonstrate whether America is suffering from the same early impact as China is.

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