After the People’s Bank of China (PBoC) announced reserve requirement ratio and interest rate cuts on September 24, many economists expected that China would introduce more stimulus measures in the near term. In line with these expectations, the National Development and Reform Commission (NDRC) held a press conference on October 8 to unveil the “Implementation of a Basket of Incremental Policies.”

When questioned by reporters about the implementation and details of the policy, the NDRC largely reiterated previous measures, including increasing government investment, boosting the income of low- and middle-income groups, and providing student-related support programs. However, in terms of future policy details, the only mention was that China would continue issuing ultra-long-term government bonds next year to support major projects and would allocate RMB 100 billion of the 2025 government investment budget to critical areas in advance.

Private consumption and investment were also lacking detailed explanations. In recent years, China’s domestic consumption and investment demand have declined due to the ongoing real estate crisis. According to the latest data, China’s retail sales in August grew by only 2.1%, continuing a downward trend, while financial institution loan balances grew by 8.5% year-on-year, marking the lowest growth in nearly 24 years.

Read more at Datatrack

Read more at Datatrack

Overall, compared to the policies announced on September 24, this press conference did not introduce any new major stimulus measures or provide details on policy implementation. Although the NDRC stated that they would release detailed plans soon and expressed confidence in achieving the annual growth target of 5%, the second-quarter GDP growth was only 4.7%, and recent data indicates that domestic demand remains weak, casting doubt on whether the target can be realistically met.

Read more at Datatrack

The market appeared disappointed by the lack of substantive policy announcements. Before the press conference, the CSI 300 Index opened with a 10% gain, but after the event, it gave back approximately 6% of the gains.

Source:  National Development and Reform Commission (NDRC)

Last week, Chinese equities continued to reflect the positive effects of easing policies, with the CSI 300 Index surging nearly 9%.In contrast, the U.S. S&P 500 Index saw a modest increase of only 0.22% due to uneven gains across sectors. In the bond market, the yield on the 10-year and 2-year Treasury note rose as expectations for rate cuts receded, narrowing the 10-year to 2-year yield spread to approximately 5 basis points. Meanwhile, the U.S. dollar index climbed to around the 102 level.

Key Economic Data Review for Last Week:

China PMI: China’s manufacturing PMI for September stood at 49.8 (previous: 49.5), marking the fifth consecutive month of contraction. Among the sub-indices, only the production index returned to expansion territory, while the other indices remained in contraction, indicating that China’s overall manufacturing sector continues to face challenges. Meanwhile, the non-manufacturing PMI came in at 50 (previous: 50.3), ending a two-month rebound. All major indices declined in September, reflecting weak consumer demand, which remained subdued even after a brief summer boost.

Read more at Datatrack

U.S. ISM PMI: The U.S. manufacturing PMI for September was 47.2 (previous: 47.4), remaining in contraction for the sixth consecutive month. While the new orders index and production index improved slightly to 46.1 (previous: 44.6) and 49.8 (unchanged), they remained in contraction, reflecting restrictive financial conditions and uncertainty around the upcoming presidential election, which continued to dampen business investment. In contrast, the services PMI increased to 54.9 (previous: 51.5), reaching its highest level since February 2023. Key sub-indices, such as the business activity index and new orders index, rose to 59.9 (previous: 53.3) and 59.4 (previous: 53.0), respectively, marking the third consecutive month of expansion, with both indices showing gains of more than 6%, highlighting strong demand for U.S. services.

Read more at Datatrack

U.S. Employment Situation: The U.S. unemployment rate for September fell to 4.1%,  better than the previous month and the market expectation of 4.2%. Nonfarm payrolls increased by 254,000 (previous: 159,000), significantly surpassing market expectations of 142,000. Employment growth in September was mainly driven by the leisure and hospitality sector, which added 78,000 jobs, and the education and healthcare sectors, which added 81,000 jobs. Additionally, initial jobless claims have shown a downward trend recently, indicating some improvement in the labor market slowdown.

Read more at Datatrack

Key Economic Data Review for This Week:

U.S. CPI (October 10): The annual growth rate of the August CPI was 2.5% (previous: 2.9%), with a monthly growth rate of 0.2% (unchanged). Core CPI, excluding food and energy, remained stable at an annual growth rate of 3.2% (unchanged), with a monthly growth of 0.3% (previous: 0.2%). Both CPI and core CPI growth rates were the lowest since February 2021. According to the Cleveland Fed, September’s CPI is expected to decrease to 2.25% (August: 2.56%), and core CPI is projected to fall to 3.11% (August: 3.21%).

Read more at Datatrack

FOMC Minutes from September Meeting (October 10): Recent data indicate that inflationary pressures have gradually eased, while the labor market shows no significant signs of deterioration. The focus of the minutes will be on the Federal Reserve’s outlook on the labor market and the economy following the recent 50-basis point rate cut.

University of Michigan Consumer Sentiment Index (October 11): The final reading of the University of Michigan’s consumer sentiment index for September was 70.1, up 2.2 points from August, marking a five-month high. The report highlighted growing consumer optimism about the future, with more consumers expecting a Harris victory in the upcoming election. Inflation expectations for one year ahead fell to 2.7% (previous: 2.8%), while the five-year inflation expectation edged up to 3.1% (previous: 3.0%). The market expects the consumer sentiment index to remain around the 70 level in October.

Read more at Datatrack

U.S. Services PMI (NMI) continued to expand in September, according to data released by the Institute for Supply Management (ISM) on October 3. The NMI rose from 51.5 in August to 54.9 in September, reaching its highest level since February 2023.

Breaking down the sub-indices, the Business Activity Index increased from 53.3 last month to 59.9, while the New Orders Index climbed from 53.0 to 59.4. Both indices have expanded for the third consecutive month, with gains exceeding 6%, driving the overall increase in the NMI and signaling that demand for U.S. services remains robust.

However, the Employment and Supplier Deliveries indices showed mixed performance. The Employment Index fell from 50.2 last month to 48.1, ending two consecutive months of expansion and returning to contraction territory. Surveyed firms reported difficulties in hiring new workers, resulting in slower employee growth, while job vacancies and layoffs remained largely unchanged, aligning with recent signs of a slowing labor market.

On the other hand, the Supplier Deliveries Index rose from 49.6 to 52.1, indicating that stronger business activity and rising orders have caused suppliers to slow their delivery times.

In other indices, the Prices Index rose from 57.3 last month to 59.4, reflecting strong demand, marking the 88th consecutive month of expansion. Meanwhile, the Inventories Index increased from 52.9 to 59.1, suggesting that businesses are stocking up in anticipation of the upcoming holiday season and in response to recent port labor strikes.

Overall, the September NMI data indicate that U.S. consumer demand remains strong. The report notes that the NMI corresponds to an annualized real GDP growth rate of 1.9%.

This contrasts sharply with the Manufacturing PMI data released the day before, which showed a reading of 47.2 for September, marking the sixth consecutive month of contraction. The gap between the two sectors’ PMI readings has widened to 7.7 points, the largest divergence since late 2019, underscoring the growing disparity in U.S. economic growth trends.

Read more at Datatrack

China’s Manufacturing PMI remained in contraction in September, according to data released by China’s National Bureau of Statistics on September 30.

China Manufacturing PMI was 49.8% in September, showing a slight improvement of 0.7% from the previous month but still below the 50-point mark, indicating a continued contraction in the manufacturing sector. Among the sub-indices, only the production index returned to expansion, while other key indicators remained in contraction, reflecting the ongoing weakness in China’s manufacturing industry.

In the non-manufacturing sector, the Business Activity Index slightly declined from 50.3 in the previous month to 50 in September, halting a two-month rise. By industry, the construction business activity index was stable at 50.7, while the services business activity index fell from 50.2 to 49.9, marking its first contraction this year. All major sub-indices declined in September, pointing to persistently weak consumer demand even after a brief summer stimulus.

Read more at Datatrack

Caixin PMI Also Shows a Slowdown…

Similarly, the Caixin PMI, which focuses more on small and medium-sized enterprises, showed a downturn in both manufacturing and services in September.

The Caixin Manufacturing PMI fell from 50.4 in August to 49.3. The production index remained in expansion but at a slower pace, while the new orders index dropped into contraction, reaching its lowest level since October 2022. The employment index remained in contraction, reflecting continued layoffs as a result of weak new orders. Although import prices decreased due to lower metal costs, weak demand further suppressed output prices.

In the services sector, the Caixin Services Business Activity Index declined from 51.6 in August to 50.3, staying barely in expansion but reaching its lowest point since October 2023. The new business index fell, only slightly above the contraction threshold, while stable external demand kept the export index in expansion. The employment index improved slightly into expansion, driven by new business, though the overall expansion remained weak. Input prices rose due to higher material and labor costs, but weak domestic demand and increased competition put downward pressure on selling prices.

Read more at Datatrack

Overall, continued weakness in domestic demand has led to declining new orders and business across both manufacturing and services, with manufacturing particularly affected. As business activity declines, companies are facing greater pressure to cut labor costs, further suppressing consumer spending. Rising material costs combined with falling product prices are also eroding business confidence in future prospects. Although the Chinese government has implemented substantial monetary easing measures and promised more support if needed, some economists believe that fiscal policies will also be necessary to address domestic demand shortfalls, as recent stimulus measures have had only short-term effects.

Last week, the People’s Bank of China introduced significant easing measures targeting interest rates, the real estate market, and the stock market, leading to a nearly 16% rebound in the CSI 300 Index from its low. Meanwhile, although the S&P 500 had already priced in the Federal Reserve’s 50 basis point rate cut, it continued to hit record highs, buoyed by ongoing gains in tech stocks. In the bond market, the yield spread between the U.S. 10-year and 2-year Treasuries remained steady at around 20 basis points. The U.S. Dollar Index continued its downward trend, consolidating around 100.

Key Economic Data Review for Last Week:

U.S. PCE: The Personal Consumption Expenditures (PCE) index for August increased by 2.2% year-over-year (previously 2.5%) and 0.1% month-over-month (previously 0.2%). The decline in PCE growth was mainly due to falling goods prices, which saw a year-over-year decrease of -0.9% (previously -0.2%), while services prices remained steady with a year-over-year increase of 3.7%. Excluding food and energy, core PCE rose by 2.7% year-over-year, a slight increase from the previous month’s 2.6%.

Read more at Datatrack

China Industrial Enterprises Total Profits: China Industrial Enterprises Total Profits fell by 17.8% year-over-year in August, a sharper decline from July’s 4.1% drop, marking the largest decrease this year. High-tech manufacturing profits, the largest contributor, declined in August, with cumulative year-over-year growth for January to August standing at 10.9% (previously 12.8%). Additionally, profits in mining and consumer goods manufacturing continued to fall due to weak demand, further exacerbating the downward pressure on overall industrial profits.

Read more at Datatrack

Australia Monetary Policy: The Reserve Bank of Australia (RBA) kept interest rates unchanged in its September meeting. The meeting statement indicated that restrictive financial conditions are slowing the economy. While household consumption is expected to rebound in the second half, if the recovery pace falls short of expectations, economic output may remain weak, leading to further slack in the labor market. The RBA also noted that recent data has heightened inflationary risks, and inflation is now expected to return to the target range by the end of 2025 (previously mid-2025).

Read more at Datatrack

Key Data to Watch This Week:

China PMI (September 30): China’s August Manufacturing PMI was 49.1 (previously 49.5), marking the fourth consecutive month of contraction. Nearly all sub-indices declined in August, remaining in contraction territory. Given the still-weak domestic demand and the incomplete impact of monetary policies, the market expects the September PMI to hold steady around 49.5.

Read more at Datatrack

U.S. ISM PMI (October 1): The U.S. Manufacturing PMI for August was 47.2 (previously 47.4). New orders and production indices fell to 44.6 (previously 47.4) and 44.8 (previously 45.9), continuing to reflect the restrictive financial conditions and uncertainties surrounding the presidential election, which have dampened corporate investment. The market expects manufacturing to exhibit uneven recovery, with the September PMI to remain around 47.6.

Read more at Datatrack

U.S. ISM NMI (October 3): The Non-Manufacturing PMI (NMI) for August was 51.5 (previously 51.4). Despite declines in business activity and employment indices, all indices remained in expansionary territory, indicating overall healthy growth in the services sector. With the U.S. holiday season approaching, the market expects the September NMI to hold steady around 51.5, continuing a trend of moderate growth.

Read more at Datatrack

U.S. Employment Situation (October 4): The U.S. unemployment rate for August was 4.2% (previously 4.3%), remaining near historic lows, with nonfarm payrolls increasing by 142,000, within the safe range of 100,000 to 200,000. Additionally, recent initial jobless claims have stopped rising, indicating a slowdown in labor market weakening. Moving forward, it will be important to monitor whether the job market can maintain its current state without deteriorating following the Fed’s rate cuts. The market currently expects the September unemployment rate to stay at 4.2%, with nonfarm payrolls increasing by around 140,000.

Read more at Datatrack