OPINION
Market Rating Before FOMC MeetingJan 31
Economic Activity in China Continues to Bleed
According to S&P Global, conditions in China's manufacturing sector continued to deteriorate modestly due to restrictions imposed in September as part of efforts to contain the Covid-19 outbreak.
S&P Global reported that the decline of new orders in the second consecutive month put downward pressure on prices and input costs fell at the fastest since the beginning of 2016.
Stating that Chinese manufacturers have reduced their stocks, S&P emphasized that although the Covid-19 closures are temporary, there are difficulties with logistics and there has been a decrease in production for four months. S&P noted that the firms lowering their operational requirements impacted industry-wide employment for six months in a row, and it is the fastest since April 2020. Finally, the report underlined that the Covid-19 closures caused supplier delivery times to prolong, while it was also noted that optimism for future production activities, in particular, was eroded.
In China, which has more than %27 of the world's manufacturing industry, the closure measures implemented by the political authority in critical provinces in the context of a zero-case policy increased the downward risks in the world's second-largest economy in relation to the global conjuncture.
At this point, the effect of the weakening of foreign demand through the European channel, where the probability of recession increased due to the energy crisis, is quite large. However, the fact that the drop in orders forces Chinese manufacturers to pull back at the price point may alleviate imported inflation pressures. On the other hand, it should be added that the signs of a slowdown in the Chinese economy are a factor that increases the demand for safe havens. As a matter of fact, ounce gold in international markets recovered to 1674 dollars and erased the losses of a week.
