China's domestic sectors to show resilience

The flash PMI reports for October will offer a first hint of just how much a toll the slowdown in emerging economies, and not least China, it taking on the real global economy.  It is notable, moreover, that in some emerging economies, such as Russia and Brazil, service output prices appear particularly high consistent with a challenging inflation picture. Finally, it is noted that new orders for manufacturing are much weaker for new export orders than overall orders. 

These trends are consistent with the picture of an overall weak global trade situation (linked both to structural shifts, China's excess capacity and softer commodity dynamics) but a still relatively resilient domestic consumer even in China. No doubt, the lower oil price is a common stabilising factor. Improved credit conditions and the end of austerity are further positives, and notably in the US and Europe. The October PMI data is expected to confirm this overall picture.