By forex calendar in CB Leading Index m/m —

CNY CB Leading Index m/m, Nov 25, 2024

CB Leading Index m/m Plunges Further: What Does it Mean for the CNY?

Breaking News (November 25, 2024): The Conference Board's (CB) Leading Economic Index for China (CNY) registered a decline of -0.3% month-over-month (m/m) for November 2024. This represents a sharper contraction than the -0.2% recorded in October and falls below market forecasts. The impact of this data release is currently assessed as low.

The Conference Board's Leading Economic Index (LEI) for China, released on November 25th, 2024, painted a concerning picture of the country's near-term economic outlook. The index, which fell to -0.3% m/m, signifies a deepening deceleration in the Chinese economy, prompting questions about the resilience of the CNY and the broader global economic landscape. Understanding the implications of this data requires a closer look at the index itself and its component parts.

Understanding the CB Leading Index (m/m)

The CB Leading Index (m/m) for China, also known as Leading Indicators, is a composite index derived from a combination of eight key economic indicators. These indicators provide a forward-looking view of the economy, aiming to predict the direction of future economic activity. The Conference Board, a highly regarded independent research organization, meticulously constructs this index by combining data points that reflect diverse aspects of the Chinese economy, including:

  • Consumer Expectations: Gauges consumer sentiment and confidence, which is a significant driver of consumption spending. A decrease in consumer confidence frequently foreshadows weaker economic activity.

  • Export Orders: Reflects the demand for Chinese goods and services internationally. Falling export orders indicate potential weakening of external demand and reduced economic growth.

  • Industry Profitability: Measures the financial health of Chinese businesses. Declining profitability suggests reduced investment and hiring, leading to slower economic expansion.

  • Logistics Index: Tracks the efficiency and effectiveness of the supply chain. A decrease often signals logistical bottlenecks, hindering production and distribution.

  • Total Loans Issued: Represents the availability of credit to businesses and consumers. Reduced lending indicates tighter monetary policy and potentially reduced investment.

  • Construction Started: Measures the level of investment in infrastructure and real estate development, crucial drivers of economic growth. Lower construction starts often signal a slowdown in investment.

  • Labour Demand: Tracks the level of job creation and hiring activity. Reduced labor demand signals potential economic weakness and increased unemployment.

  • Imports of Capital Goods: Represents investment in machinery and equipment. Falling imports suggest reduced investment in productive capacity.

The -0.3% decline in the November 2024 index signifies a worsening of economic conditions across several of these key areas. This is particularly noteworthy given that the index, while aiming to be predictive, often exhibits a muted impact due to the fact that many of its constituent indicators are already publicly available before its release.

Implications for the CNY and the Global Economy

While the impact of this single data point is assessed as currently low, the continued downward trend in the CB Leading Index warrants attention. Generally, an 'Actual' value exceeding the 'Forecast' is considered positive for the currency. However, the -0.3% result, lower than previous months and below expectations, signals a potential weakening of the Chinese economy. This could, in the long term, exert downward pressure on the CNY. The global interconnectedness of the Chinese economy means that sustained weakness could have ripple effects on global trade and investment.

Looking Ahead

The Conference Board will release the next reading of the CB Leading Index (m/m) on December 17th, 2024. Market participants will be keenly watching for further confirmation of the current downward trend or signs of a potential rebound. The index's trajectory will significantly impact investor sentiment toward the CNY and China's broader economic prospects. Further analysis considering other economic indicators and government policies will be necessary for a complete picture of the Chinese economic outlook. This data point serves as a cautionary signal that demands close monitoring and further investigation.