China: Outlook looks firm in November – UOB

Economist at UOB Group Ho Woei Chen, CFA, reviewed the recent data releases in the Chinese economy.

Key Quotes

“The manufacturing Purchasing Manager’s Index (PMI) from China Federation of Logistics & Purchasing (CFLP) surged by 0.7 point to 52.1 in November (Bloomberg poll: 51.5; Oct: 51.4), its highest reading since September 2017. The CFLP non-manufacturing PMI also came in above expectation at 56.4 in November, up 0.2 point from October (Bloomberg poll: 56.0; Oct: 56.2). The reading is at its highest since June 2012. Both readings suggest that there is no letting up in China’s economic recovery momentum in 4Q, supported by strong seasonal demand with higher spendings expected in lieu of holiday travel.”

“The manufacturing PMI is now into its 9th consecutive month of expansion, defined as a reading above the threshold of 50. The main components including production (54.7 from 53.9 in Oct), new orders (53.9 from 52.8 in Oct) and new export orders (51.5 from 51.0 in Oct) were up strongly but employment has remained in contraction (49.5 from 49.3 in Oct) for the 7th straight month. This suggests that businesses are still cautious to increase headcount despite brightening economic outlook.”

“The rebound in the non-manufacturing PMI has been swift since March with the reading also recording its 9th consecutive month of expansion even though some industries in retail have remained weak as foreign visitors stayed away.”

“We maintain our 4Q20 GDP growth forecast at 6.2% y/y (3Q20: 4.9%) with our full-year 2020 GDP growth at 1.9%.”