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Fast Comment ChinaTrade war weighs on manufacturers

  1. Manufacturing PMIs send mixed picture
  2. More stimuli to be expected
Manufacturing PMIs send mixed picture
Manufacturing PMI from Markit was flat at 50.2 from April to May, slightly better than expected, whereas the official manufacturing PMI disappointingly fell to only 49.4 from 50.1, thus falling back below the 50 threshold for expansion versus contraction. We usually prefer private Markit’s gauge over the official gauge, but with the trade war headwinds escalation, we see momentum as being downwards despite the stable Markit PMI.
More stimuli to be expected
With most of the March rebound in the official PMI now eliminated, we fear that the rebound was more due to seasonally noise than a true stimulus-driven activity rebound. Both the escalating trade tensions and the renewed weakness of economic data increase the chance of more stimuli from the authorities. That will mitigate but not completely counter the trade war impact and the structural growth slowdown, and we see growth stabilising at best before slowing again later this year.


Bjarke Roed-Frederiksen

Senior Economist

Latin America and China

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