July 2023 CLIEAC indicates economic Contraction in China

This report presents the July 2023 update on the Commodity Leading Index Economic Activity China (CLIEAC, see Appendix for index description).

Contraction As indicated by our CLIEAC, the Chinese economy has entered into contraction mode. Manufacturing conditions are worsening (Caixin/Markit PMI fell from 50.9 to 50.4; NBSC PMI rose from 48.8 to 49.0), with an increasingly dire job market to rising deflationary pressure and waning optimism. June trade data exports fell to -12.4%, as weakening global demand and accelerated supply-chain reshoring led by the US, while imports fell to -6.8%, with import value of commodities declining last month because of falling prices. RMB is depreciating against the basket of currencies of main trade partner.

Correspondingly, as shown in the Swirlogram, the CLIEAC places overall economic activity in contraction mode. The monthly index average moved by -0.27 over the month to -0.26 (one year range is -0.84 to 0.21). The current quarter average of -0.26 is below the previous quarter average of 0.12 and below the yearly average of -0.21.


Note: The values of the previous quarters reflect the index average for the entire quarter. The values of the current quarter reflect the index average for the current quarter up to the date of the report release.

CLIEAC Components Over the previous period 0 components of the CLIEAC increased, 8 remained within the momentum range of +/-0.3 standard deviations (s.d) and 6 decreased. Less than half the components (05 out of 14) remain above their long-run average of zero.

On the negative side, Fiscal Revenue exhibited the largest drop of -1.72 s.d., followed by Retail Sales and Electricity Production.

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Appendix: Index Composition

The Commodity Leading Index Economic Activity China (CLIEAC) is a composite index that provides a measure of overall economic activity in China. The index consists of a equally weighted basket of components which reflect fundamental data related to economic activity. Each index component is Chinese New Year calendar effect-, trend- and seasonally adjusted, smoothed, normalized and updated in the index as new data becomes available. The rolling standard score (Zscore) approach is applied to normalize each component before aggregation. As such, a reading above zero indicates expansion and below zero contraction of economic activity relative to the long-run average. Upwards and downwards movements of the index indicate improving and deteriorating economic activity respectively. The CLIEAC is composed of 14 components covering supply- and demand- side factors across five categories.

  • Production: Electricity Production, Fiscal Revenue, Caixin/Markit and NBSC Purchasing Manager Index

  • Transportation: Port Freight Traffic, Railway Freight Traffic

  • Trade: Total Imports, Total Exports

  • Consumption: Retail Sales, Real Estate Sales, Vehicle Sales

  • Investments: Fixed Assets Investment Real Estate and Manufacturing, Foreign Direct Investments