We have the next round of Chinese data following Tuesday's PMIs whereby the manufacturing PMI and Non-Manufacturing PMI returned to above-50 in March. The Caixin/Markit China Manufacturing PMI for March arrived as follows on Wednesday:
Caixin/Markit China Manufacturing PMI
- Bounces to 50.1 versus 40.3 in February, poll 45.5.
- Production expands in March but new orders, export orders, employment still in contractionary territory.
While we see improvements, they could be brief considering they are month-on-month comparisons for survey respondents. However, they are giving some glimmer of light at the end of the tunnel and can be enjoyed by the optimists in the markets, proving some resilience to the yuan and the AUD. However, currency action was muted on the release today, priced in.
China’s Q2 GDP could contract from -0.4% YoY to -2.1%
As for the outlook for the second quarter, analysts at ANZ Bank argued that it continues to be "concerning due to an acute drop in external demand and lacklustre domestic demand."
Our model indicates that China’s Q2 GDP could contract from -0.4% YoY to -2.1%, pending on the evolution of the COVID-19 pandemic. We estimate that the fiscal policy measures will add only 3.6ppt to GDP, which is insufficient to compensate for the growth contraction in H1. However, the situation could be very fluid as the virus outbreak remains unpredictable. Chinese policymakers will likely step up and expand the stimulus programme if needed.
The Caixin China Manufacturing PMI, released by Markit Economics, is based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 400 private manufacturing sector companies.
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