TO gauge the scope of China’s economic slowdown, begin with forklifts.
The factory workhorses are a barometer of the manufacturing sector’s fitness. Changes in demand can ease or worsen concerns about China.
By that measure, EnerSys sees trouble.
The Reading, Pa., maker of batteries that power forklifts said those sales in China fell in the latest quarter after rising 10% or more earlier in the year.
“We’ve seen a slowdown,” said Michael Schmidtlein, EnerSys’ finance chief. “Given that forklifts are a good indicator of economic activity, their general economy has slowed, and maybe far greater than the authorities are indicating.”
Fourth-quarter results from U.S. companies highlight the many and varied ways that China’s cooling economy affects American business, and, in turn, offer a glimpse of what’s happening inside China. The indications are that slowing growth there is broad, if still modest.
For U.S. businesses, the repercussions extend well beyond slowing sales at companies with the biggest exposure to China’s vast economy.
Companies like EnerSys are struggling with weaker demand from export manufacturers in China, which are pulling back amid fears that trade tensions will worsen. Retailers and other companies catering to Chinese consumers face signs of weakness among the country’s growing middle class. They are buying fewer cars, phones and are traveling less.
Some analysts expect that China’s slowing growth, and its effects on U.S. companies, will worsen in the first quarter. A recent business-sentiment survey from Oxford Economics found that many North American and European businesses see elevated risks of a sharp global downturn, with many citing China’s economy and its policy response as significant risks.
“The expectation is that Q1 is going to be brutal,” said Brad Setser, former deputy assistant Treasury secretary for international economic analysis in the Obama administration, and now a senior fellow in international economics at the Council on Foreign Relations.