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Fast Comment ChinaEconomy on track for stimulus-driven rebound despite PMI decline

  1. Economy on track for stimulus-driven rebound despite PMI decline
  2. Growth should still improve in Q2
Economy on track for stimulus-driven rebound despite PMI decline
Both manufacturing PMIs disappointed by declining somewhat in April, thereby reversing some but clearly not all of the jump in March. PMI from private Markit fell to 50.2 from 50.8 against consensus expectations of a slight increase to 50.9. The official PMI fell to 50.1 from 50.5 against expectations of an unchanged reading. Both PMIs thus remain above the 50 threshold, and despite the small declines, the April readings confirm that growth momentum improved from Q1 going into Q2 due to economic stimuli kicking in. Note that April is the first month that with certainty was not distorted by the Chinese New Year celebrations.
Growth should still improve in Q2
Looking ahead, we expect stimulus-driven improvement in Q2 as fiscal stimuli kick in further. However, we remain sceptical as to whether the authorities are willing to boost as much as they have done in prior downturns, as they are more hesitant to ease to avoid re-inflating the credit bubble. We see growth slowing gradually again late this year.


 



Disclaimer

Bjarke Roed-Frederiksen

Senior Economist

Latin America and China

bjro03@handelsbanken.dk

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