Daily Economic Outlook - September 22nd 2015

Expect the overnight release of the September preliminary Caixin manufacturing PMI to have a big impact  on global financial markets after the Fed highlighted the importance of economic developments in China on US interest rate policy. Unlike other official data, the Caixin, a private survey, will be viewed as a more unbiased indicator of economic activity.  

After the Caixin fell to 47.3 in August - its lowest reading since March 2009 - there is good reason to expected a modest improvement in the September print to 47.5 . Volatility in domestic equity markets by mid-September, the timing of  the preliminary survey , had come off its late July/early August highs. Officials in China have  also messaged that economic and financial market stability, including the RMB exchange rate, should prevail in coming months, suggests Lloyds Bank. This after they eased monetary policy conditions further in August. Meanwhile, the China leading index, a more forward-looking indictor of activity  seemed to have found its low in March.  

A modest improvement in  this single indicator from a low level, alone, however, may only provide short-term assurances that conditions in China are stabilising. Particularly, when considering the Caixin is based on a smaller sample size and geared to more export oriented small-to-medium sized private companies than the official survey.  Not a great indicator if you consider the bulk of China's economic growth has centred around domestic fixed investment and state owned enterprises.

"Today in the UK, the release of public sector borrowing data will likely show that fiscal performance continues to outperform the government's summer budget expectation. For August, we look for net borrowing of £9.9bn (ex-banks), an improvement of £0.5bn relative to last year, and net borrowing of £9.1bn on the headline measure. We also expect the first positive PSNCR in August since 2011, with a repayment of £2.3bn", says Lloyds Bank.