China: PMIs sustain the recovery – UOB

Ho Woei Chen, CFA, Economist at UOB Group assessed the latest PMI readings in the Chinese economy.

Key Quotes

“China Caixin manufacturing Purchasing Manager’s Index (PMI) surged 1.6 points to 52.8 in July compared to 51.2 in June (Bloomberg est: 51.1). This was the third straight month of expansion (above-50 reading). The headline PMI, production and new orders sub-indexes were all at their highest levels since January 2011.”

“Similarly, the official manufacturing PMI had also improved, edging up to a 4-month high as it rose 0.2 point to 51.1 in July (Bloomberg est: 50.8). This was the fifth straight month of expansion and comes on the back of a strong rebound from record low in February.”

“Overall, the improvements in both the official and Caixin manufacturing PMIs as well as the robust reading in the non-manufacturing PMI suggest that China’s economy will continue to recover in 3Q20. Our GDP forecast for China remains at 1.8% for 2020 with 3Q20 growth likely to accelerate to 4.9% y/y and around 5.7% in 4Q20. The key risks remain centred on the pandemic recovery globally, US-China relations as well as the impact from floods in China.”