China: PMIs confirm the positive momentum – UOB

Economist at UOB Group Ho Woei Chen, CFA, comments on the latest PMI data in the Chinese economy.

Key Quotes

“The Purchasing Manager’s Index (PMI) from China Federation of Logistics & Purchasing (CFLP) for both manufacturing and non-manufacturing fell by a larger-than-expected pace in April. However, the sharp rebound in the private sector Caixin manufacturing PMI likely eased concerns about the slowdown in April.”

“We think that the larger-than-expected drop in the CFLP PMIs likely indicated a moderation in expectations during April following the surge in March, when both sets of PMIs rebounded sharply towards their November peaks. Factors such as supply bottlenecks especially in the electronics industry as well as higher transportation costs may have weighed on the manufacturing outlook while services could be affected by expectation of slower credit growth ahead. However, the latest retail sales data in March has painted a more optimistic outlook for consumption demand.”

“Importantly, the CFLP manufacturing and non-manufacturing PMIs have continued to remain in expansion (defined as a reading above 50) since March 2020 while the Caixin manufacturing PMI has stayed in expansion since May 2020. This suggests that the outlook is still positive despite the moderation in the official PMIs.”