CHINA ECONOMY CONTINUES TO SLOW

Further falls in mainland economy forecast

Jennifer Li
Monday, October 12, 2015

China releases September's trade and inflation data this week, with analysts pessimistic as advance indicators show economic momentum has continued to slow.The consumer price index growth, to be known on Wednesday, may slip from 2 percent in August as food prices the biggest and most volatile part of CPI slide, said Tom Orlik, Bloomberg's chief Asia economist.
Shenwan Hongyuan Securities expects inflation to rise only 1.8 percent from a year back with output of vegetables and eggs in a high-yield season that drags prices down and the supply of pork has surpassed demand.
That matches expectations at China Merchants Securities.
With the prices of commodities remaining low regardless of a slight rebound in late August, it said, the producer price index will also drop 6 percent from 12 months ago. And exports for September, which will be out tomorrow, may fall 6.4 percent from a year back compared with a 5.5 percent drop in August.
Also, CMS forecast, the slump in imports will increase to 20.5 percent after a 13.8 percent fall-off in August.
The devaluation of the yuan since August 11 has stimulated exports very little, according to HuaChuang Securities. But UBS expects exports to shrink only 4 percent as recovery in Europe and the United States will have bolstered demand.
But Orlik said economic weakness in China is wider and deeper, and there is room for more rate cuts.
Besides weak purchasing managers' indexes last month, a rebound in home sales that started this year is also losing momentum given that the growth rate of UnionPay's real estate index has fallen for three months after a peak in June.
Local consumption is also weakening, based on UnionPay Advisors' tracking of hotel registrations and restaurant revenue.