Despite China's Slowdown, US Confidence Thrives in October

(Continued from Prior Part)

Manufacturing accounts for about 31% of China’s GDP (gross domestic product). According to the China NBS (National Bureau of Statistics) manufacturing PMI (purchasing managers’ index ) remained unchanged at 49.8 in October 2015.

While new orders increased by 0.1 points to 50.3 in October, China’s production index declined by 0.1 points to 52.2. Meanwhile, suppliers’ delivery times fell to 50.6 from 50.8 in September, and raw material stock and the country’s employment index both contracted further in October.

With China’s manufacturing below neutral level, the iShares China Large-Cap (FXI) and the Direxion Daily FTSE China Bull 3X ETF (YINN) declined by 0.29% and 1.18% as of October 30. Companies such as China Petroleum & Chemical Corporation (SNP) and Aluminum Corporation of China (ACH) declined by 0.24% and 1.2%, respectively, as of October 30. China Mobile (CHL), on the other hand, rose by 0.38% as of the same date.

The service sector contributes about 48.2% to China’s GDP. In China’s service sector, the PMI fell by 0.3 points to a reading of 53.1 in October, compared to its level of 53.4 in September. New orders jumped to 51.2 in October compared to 50.2 in September, and input prices increased to 51.2 in October.

Meanwhile, although they stayed below neutral level, sales prices and employment increased by 0.9 and 0.1 points, respectively, to 48.8 and 49.6 during the same period. Companies such as E-Commerce China Dangdang (DANG) and Alibaba Group Holding (BABA) increased by 1.7% and 1.9%, respectively, as of October 30.

For three consecutive months, as of October 30, China’s manufacturing PMI reading stayed below the neutral level of 50, indicating a sluggish environment. The slide in the service sector in October as well suggests that overall economic conditions are still weakening in China. The country’s devaluing currency may help China to increase export demand, but unless it is well supported by domestic optimism, the economic slowdown could persist, and any revivals in its economy would be delayed.

You may also be interested in reading the series Consumer Spending Helps Economic Growth in Third Quarter.

To remain updated on the economic front, refer to our Global ETF Analysis page.

Browse this series on Market Realist:

• Part 1 - How Declining Wages and Salaries Kept Personal Income and Outlays Lower In September
• Part 2 - Production and New Orders Look Positive for Manufacturing in October
• Part 3 - Confidence Boosts among Low-Income Households Drives Consumer Sentiment