Data Flash is a brief interpretive summary of China’s official monthly economic data release.
Almost every indicator released throughout the month of August—from PMIs, to Industrial Production to New Loans for nonfinancial companies—came in below market expectations. Exports, for example, contracted outright by -8.3 percent y-o-y in July—a really dismal data point. The Caixin manufacturing PMI for August came in at the lowest point since the global crisis in 2008. And the official PMI for August fell to 49.7, the lowest point since August 2012. All of these factors—from equities to exports, currency to corporate loans—ultimately combined to induce the PBoC to take yet further action on the monetary policy front.
All of these developments highlight two issues about recent financial and macroeconomic policy. First, traditional support measures through fiscal, quasi-fiscal, and monetary policy levers are increasingly ineffective—something that has become increasingly evident over the past three years. Second, various efforts to support misaligned asset prices—most recently, the exchange rate and the level of equity indices—are coming at the expense of accomplishing fundamental economic goals: specifically, growth stabilization and reform.