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Fast Comment ChinaStable PMIs reassuring as New Year distortion subsides

  1. Both manufacturing PMIs were stable in April
  2. New Year distortion no longer in play
  3. Overall growth set to slow ahead
Both manufacturing PMIs were stable in April
Manufacturing PMI from Markit increased slightly to 51.1 in April from 51.0 in March, versus expectations of a slight decline to 50.9. The official manufacturing PMI index fell slightly to 51.4 in April from 51.5 in March, which was a smaller fall than that expected by the consensus. The overall picture is that both indices stabilised in April following unsynchronised swings in the preceding months.
New Year distortion no longer in play
As has been the case with most Chinese macroeconomic indicators over recent months, the PMIs (especially the official PMI) are very likely to have been distorted by the New Year holiday. We note that the official PMI plunged in February but rebounded just as much in March. The April reading is unlikely to have been distorted by the timing of the holidays, and it is therefore reassuring that the index was stable at a fairly high level.
Overall growth set to slow ahead
The sub-indices for new export orders fell in what could be the first sign of exporters being worried by the ongoing trade war with the US. If the trade war escalates further and tariffs or other trade-hindering measures are introduced, this will clearly have negative consequences for overall growth. Even if a full-blown trade war is avoided, there are reasons to expect a slowdown, in our view. As the authorities try to reign in financial risks and dampen shadow banking activities, credit growth is slowing, thereby hurting overall economic growth. Furthermore, measures to dampen the wobbly property market, especially in terms of prices, have not yet been rolled back, while fiscal policy is being tightened rather than loosened. Should growth slow more abruptly, the authorities stand ready to support the economy to ensure that the growth target is achieved, we believe.


Bjarke Roed-Frederiksen

Senior Economist

Latin America and China

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