Fast Comment ChinaMarkit PMI declined unexpectedly

The official manufacturing PMI index increased more than expected and by more than a full index point from 50.3 in February to 51.5 in March. On the contrary, manufacturing PMI from Markit unexpectedly fell from 51.6 in February to 51.0 in March. The official index rebounded from a drop of roughly the same size in February, and the rebound thus confirms that the February drop likely was a distortion due to the timing of the New Year holidays.

Markit usually seems to better adjust for the New Year than the official statistical bureau, and we therefore conclude that the trend is downward. That would be in line with our view that overall economic growth should slow gradually ahead. The construction boom is very likely over due to the many measures taken by the authorities to avoid speculation and dampen the lively housing markets. The authorities are also eager to dampen overall credit growth and, in particular, shadow banking activity, and that, along with the measures to combat air pollution and the escalating trade war with the US, will inevitably weigh on economic growth ahead.