According to analysts from Danske Bank, today’s data showing weaker profit growth and the PMI underline Chinese slowdown.
Key Quotes:
“The official version of PMI manufacturing for November dropped further to 50.0 from 50.2 in October. It just escaped falling below the psychologically important 50-level, which would have signalled contraction. The details showed another drop in the new orders index to a two-year low. Data on industrial profits painted a similar picture as they showed a decline to 3.6% y/y in October from 4.1% in September.”
“The slowdown is no big surprise and is in line with our expectations. We look for stimulus to kick in more forcefully during the first half of 2019 and it might be increased further through tax cuts for households and companies, and possibly more reductions of the Reserve Requirement Ratio for banks. When a trade deal is finally struck, which we look for eventually, it should also lift uncertainty and underpin demand.”