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| China's manufacturing growth hits 14-month low as trade war bites - business live | China's manufacturing growth hits 14-month low as trade war bites - business live |
| (35 minutes later) | |
| Economics consultancy Pantheon blame the US tariffs for the slowdown in China’s factories last month. | |
| "China’s Caixin manufacturing PMI signals trade tariff damage" @freyabeamish @mc_economist #PantheonMacro | |
| So far, America and China have imposed 25% tariffs on $50bn of each others goods. | |
| Later this week, Donald Trump could sign off levies on another $200bn of Chinese imports, which would escalate the trade war significantly. | |
| In another blow, Turkey’s inflation rate has surged as the slump in the lira hits consumers. | |
| Prices rose by a painful 17.9% in August, up from 15.9% in July. That’s the highest level since 2003, and shows that the Turkish currency crisis is causing real damage. | |
| Turkish consumer inflation jumped more than 2% in August to 17.9% -- the highest since the end of 2003. Producer prices, meanwhile, rose 6.6% for the month. #Turkey | |
| Typically such blistering price rises would prompt an interest rate hike to curb demand. | |
| But Turkey’s central bank may be unwilling to hike borrowing costs at its next meeting, in a fortnight’s time, due to president Erdoğan’s firm opposition to high interest rates. | |
| The lira wobbled late last week when a deputy governor resigned; Erdoğan will name his replacement, under new powers approved this year. | |
| Ouch! Turkey’s factory sector had a torrid time in August, as the country’s currency crisis hurt its economy. | Ouch! Turkey’s factory sector had a torrid time in August, as the country’s currency crisis hurt its economy. |
| The Turkish manufacturing PMI, just released, fell to just 46.3 last month from 51.0 in July. That drags the sector straight back into contraction. | The Turkish manufacturing PMI, just released, fell to just 46.3 last month from 51.0 in July. That drags the sector straight back into contraction. |
| The Turkish lira slumped dramatically last month, from 5 lira to the US dollar on 1 August to over 7 lira/$1 a fortnight later. | The Turkish lira slumped dramatically last month, from 5 lira to the US dollar on 1 August to over 7 lira/$1 a fortnight later. |
| This did make exports more competitive, but also sent import costs surging, drove up the cost of repaying loans in foreign currencies, and prompted fears of capital controls or an IMF bailout. Not good for business. | This did make exports more competitive, but also sent import costs surging, drove up the cost of repaying loans in foreign currencies, and prompted fears of capital controls or an IMF bailout. Not good for business. |
| The Istanbul Chamber of Industry, which compiles the report, says (with a touch of understatement: | The Istanbul Chamber of Industry, which compiles the report, says (with a touch of understatement: |
| August was a month of challenging business conditions for manufacturing firms in Istanbul. Weakness of the Turkish lira led to strong inflationary pressures, and contributed to slowdowns in both output and new orders. | August was a month of challenging business conditions for manufacturing firms in Istanbul. Weakness of the Turkish lira led to strong inflationary pressures, and contributed to slowdowns in both output and new orders. |
| Currency weakness did have the effect of helping to support new export orders, which increased fractionally during August. | Currency weakness did have the effect of helping to support new export orders, which increased fractionally during August. |
| China isn’t the only country to experience a manufacturing slowdown last month. | China isn’t the only country to experience a manufacturing slowdown last month. |
| South Korea’s factory sector shank for the sixth month in a row. Its manufacturing PMI came in at 49.9, up from 48.3 in July, but still in contraction territory (just). | South Korea’s factory sector shank for the sixth month in a row. Its manufacturing PMI came in at 49.9, up from 48.3 in July, but still in contraction territory (just). |
| That may show that the US-China trade war is sending ripples of uncertainty into other markets. | That may show that the US-China trade war is sending ripples of uncertainty into other markets. |
| China’s export situation is currently “grim”, warns Dr. Zhengsheng Zhong of CEBM Group. | China’s export situation is currently “grim”, warns Dr. Zhengsheng Zhong of CEBM Group. |
| He fears today’s slowdown in China’s factory growth could be a prelude to a wider slowdown. | He fears today’s slowdown in China’s factory growth could be a prelude to a wider slowdown. |
| “Generally speaking, the manufacturing sector continued to weaken amid soft demand, even though the supply side was still stable. | “Generally speaking, the manufacturing sector continued to weaken amid soft demand, even though the supply side was still stable. |
| Prices of industrial products were underpinned by a proactive fiscal policy, and environmental protection policies that had limited some factory production. I don’t think that stable supply can be sustained amid weak demand. In addition, the worsening employment situation is likely to have an impact on consumption growth. | Prices of industrial products were underpinned by a proactive fiscal policy, and environmental protection policies that had limited some factory production. I don’t think that stable supply can be sustained amid weak demand. In addition, the worsening employment situation is likely to have an impact on consumption growth. |
| China’s economy is now facing relatively obvious downward pressure.” | China’s economy is now facing relatively obvious downward pressure.” |
| Chinese factory bosses are growing increasingly worried about the trade war with America, data firm Caixin says. | Chinese factory bosses are growing increasingly worried about the trade war with America, data firm Caixin says. |
| Optimism regarding future production remained relatively subdued in August, with confidence little-changed from June’s recent low. | Optimism regarding future production remained relatively subdued in August, with confidence little-changed from June’s recent low. |
| Positive forecasts were generally linked to expectations of rising client demand. However, concerns over the ongoing China-US trade war and softer demand conditions weighed on overall sentiment. | Positive forecasts were generally linked to expectations of rising client demand. However, concerns over the ongoing China-US trade war and softer demand conditions weighed on overall sentiment. |
| Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. | Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. |
| Today we discover how the world’s manufacturers fared in August, in the face of trade war anxiety and worries over the global economy. | Today we discover how the world’s manufacturers fared in August, in the face of trade war anxiety and worries over the global economy. |
| And the early signs aren’t good -- growth in China’s manufacturing sector has slowed to its lowest level in over a year. Export orders shrank in August, for the fifth month in a row, and factory bosses cut staff. | And the early signs aren’t good -- growth in China’s manufacturing sector has slowed to its lowest level in over a year. Export orders shrank in August, for the fifth month in a row, and factory bosses cut staff. |
| Import costs also jumped sharply, as firms paid the price of the tit-for-tat tariffs imposed on some US goods entering China. | Import costs also jumped sharply, as firms paid the price of the tit-for-tat tariffs imposed on some US goods entering China. |
| This dragged the Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) down to 50.6 in August from July’s 50.8. | This dragged the Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) down to 50.6 in August from July’s 50.8. |
| That’s the weakest level since June 2017, and worryingly close to the 50-point mark that shows stagnation. | That’s the weakest level since June 2017, and worryingly close to the 50-point mark that shows stagnation. |
| China's Caixin manufacturing PMI hit 14-month low https://t.co/2Gq8kFyLkO pic.twitter.com/DqLaCjNiiT | China's Caixin manufacturing PMI hit 14-month low https://t.co/2Gq8kFyLkO pic.twitter.com/DqLaCjNiiT |
| Although output did increase, new orders rose at the slowest rate since May 2017, as Caixin explains: | Although output did increase, new orders rose at the slowest rate since May 2017, as Caixin explains: |
| Latest data indicated that demand conditions softened, with total new business rising at the slowest pace for 15 months. | Latest data indicated that demand conditions softened, with total new business rising at the slowest pace for 15 months. |
| Weaker foreign demand contributed to the softer increase in overall new work, with export sales declining for the fifth month in a row. | Weaker foreign demand contributed to the softer increase in overall new work, with export sales declining for the fifth month in a row. |
| This slowdown suggests that the tariffs imposed on Chinese goods by Washington this year, and the threat of further levies this autumn, are now hurting China’s economy. | This slowdown suggests that the tariffs imposed on Chinese goods by Washington this year, and the threat of further levies this autumn, are now hurting China’s economy. |
| Later today we learn how Europe’s factories performed. The UK manufacturing PMI is expected to dip a little to 53.9 from 54 in July. That would be a pretty solid performance. | Later today we learn how Europe’s factories performed. The UK manufacturing PMI is expected to dip a little to 53.9 from 54 in July. That would be a pretty solid performance. |
| Also coming up | Also coming up |
| Italy is on the radar after rating agency Fitch lowered its outlook on Italian debt to “negative” last week. | Italy is on the radar after rating agency Fitch lowered its outlook on Italian debt to “negative” last week. |
| The country’s populist government has hit back, saying it will make a “historic choice” between what citizens need and what ratings agencies say should be done. That’s likely to leave investors on edge. | The country’s populist government has hit back, saying it will make a “historic choice” between what citizens need and what ratings agencies say should be done. That’s likely to leave investors on edge. |
| Argentina’s government is expected to announce sweeping spending cuts on Monday, in an attempt to tackle the currency crisis that had sent the peso plunging his year. | Argentina’s government is expected to announce sweeping spending cuts on Monday, in an attempt to tackle the currency crisis that had sent the peso plunging his year. |
| The pound may also come under pressure, after UK PM Theresa May (once again) ruled out a second Brexit referendum, and eurosceptic MPs attacked her Chequers plan. | The pound may also come under pressure, after UK PM Theresa May (once again) ruled out a second Brexit referendum, and eurosceptic MPs attacked her Chequers plan. |
| Here’s the agenda | Here’s the agenda |
| 9am BST: Eurozone manufacturing PMI for August | 9am BST: Eurozone manufacturing PMI for August |
| 9.30am BST: UK manufacturing PMI for August | 9.30am BST: UK manufacturing PMI for August |