November 2022 CLIEAC indicates economic Contraction in China
This report presents the November 2022 update on the Commodity Leading Index Economic Activity China (CLIEAC, see Appendix for index description).
Contraction As indicated by our CLIEAC, the Chinese economy is in contraction mode. Manufacturing conditions are worsening (Caixin/Markit PMI fell from 48.1 to 49.2; NBSC PMI fell from 50.1 to 49.2), as Covid-19 disruptions worsened and exports remained under pressure. October trade data exports fell to -0.3%, mid dwindling external demand and further fallout from the zero-Covid policy, while imports fell to -0.7%, pressured by weak domestic consumption and a deepening property sector crisis. 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 -0.09 over the month to -0.27 (one year range is -0.64 to 0.37). The current quarter average of -0.22 is below the previous quarter average of -0.1 and below the yearly average of -0.08.
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 4 components of the CLIEAC increased, 5 remained within the momentum range of +/-0.3 standard deviations (s.d) and 5 decreased. Less than half the components (03 out of 14) remain above their long-run average of zero.
On the positive side, the Fiscal Revenue experienced the largest increase of +0.59 s.d., followed by Fixed Asset Investment Real Estate and Major Coastal Ports Volume.
On the negative side, Railway Freight Traffic exhibited the largest drop of -0.86 s.d., followed by Exports and Foreign Direct Investment.
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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