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21 May 2015
Weak Chinese Manufacturing signals need for further policy accommodation – ING
FXStreet (Barcelona) - Tim Condon of ING, reviews the May China HSBC Markit Manufacturing PMI data release further supports consensus view of further policy easing in the country.
Key Quotes
“The HSBC-Markit flash manufacturing PMI recovered to 49.1 in May, a bit below the 49.3 consensus forecast but up from a 1-year low of 48.9 in April. The index has been below 50 since December apart from LNY-distorted February. The official (CFLP) manufacturing PMI is less volatile than the HSBC index; it fell below 50 in January and February but rose to 50.1 in March and remained there in April.”
“All PMI components were below 50 in May. The negative swing in the new export orders component to contraction from growth and in the output component to contraction from no change stood out. The stocks of finished goods and the quantity of purchases components contracted at faster rates. The other components contracted at slower rates.”
“The data reinforce our view that 1Q15 export slump not only persists in 2Q but has spread to domestic spending. Average monthly exports and imports in the first four months are 20% below their 4Q14 averages.”
“We revised our 2Q15 GDP growth forecast to 6.8% from 7% and our 2015 forecast to 6.9% from 7.0%. We think more policy stimulus will be needed to prevent growth from falling short of the “about 7%” target.”
Key Quotes
“The HSBC-Markit flash manufacturing PMI recovered to 49.1 in May, a bit below the 49.3 consensus forecast but up from a 1-year low of 48.9 in April. The index has been below 50 since December apart from LNY-distorted February. The official (CFLP) manufacturing PMI is less volatile than the HSBC index; it fell below 50 in January and February but rose to 50.1 in March and remained there in April.”
“All PMI components were below 50 in May. The negative swing in the new export orders component to contraction from growth and in the output component to contraction from no change stood out. The stocks of finished goods and the quantity of purchases components contracted at faster rates. The other components contracted at slower rates.”
“The data reinforce our view that 1Q15 export slump not only persists in 2Q but has spread to domestic spending. Average monthly exports and imports in the first four months are 20% below their 4Q14 averages.”
“We revised our 2Q15 GDP growth forecast to 6.8% from 7% and our 2015 forecast to 6.9% from 7.0%. We think more policy stimulus will be needed to prevent growth from falling short of the “about 7%” target.”