Some Brushing Away China Economic Worries

Many U.S. consumer companies are brushing aside worries that China’s weakening economy and sputtering stock market will dramatically damage their bottom lines even with early trouble signs in recent earnings reports.  Most notably, companies dependent on Chinese infrastructure growth, such as United Technologies Corp (UTX.N) and Caterpillar Inc (CAT.N), are claiming soft second-quarter earnings and a downgraded outlook based on weakened Chinese demand.

Consumer companies like United Continental Holdings Inc (UAL.N), Apple Inc (AAPL.O) and General Motors Co (GM.N), on the other hand, continue to paint a rosy picture based on continued strong demand by the Chinese consumer.  The Chinese economy has faced difficulties this year as decelerating growth in factory output, retail sales and domestic investment has been compounded by a slowing property market.

China’s economy is expected to expand 7 percent this year, with growth slowing to 6.7 percent in 2016, a Reuters poll of analysts showed on Thursday.  “We have been worried about it,” Steve Weeple, head of global equities at global asset manager Standard Life Investments in Boston, told Reuters. “We would certainly not be surprised to see some of the big consumer packaged goods companies, some of the industrials, reporting that China activity is probably a little below headline growth rates.”


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