Chinese data implies their economy will continue growing
Earlier today, the Chinese national bureau of statistics released a stable set of numbers on the economy, showing the country’s economy will continue to expand for the foreseeable future. Manufacturing PMI for April was printed at 51.4, lower than last month but higher than the median expectation. Services PMI came in stronger than expected, printing 54.8, a 0.4 increase over the March number.
Economists interviewed by Bloomberg on the topic are also fairly optimistic on China’s prospects;
“We believe the government will manage the situation well and won’t let a trade war take place,” said Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd. “Domestic consumption is also resilient, and only investment -- local government investment in particular -- has slowed a bit, and that’s aimed at controlling debt.”
“The numbers are pretty solid,” Zhu Haibin, chief China economist at JPMorgan Chase & Co. in Hong Kong, said in a Bloomberg TV interview. “This news suggests growth momentum is still fine,” though risks still remain, he said.
Caixin will publish their PMI’s later this week, on Wednesday. This gauge better reflects the conditions at small firms and in the private sector. Manufacturing PMI is surveyed to come in at 50.9, slightly lower than the 51 mark of last month. The services PMI is expected to stay flat, at 52.3.
Private gauges tell a more divided story
An article by Bloomberg from last week sums up several private indicators on the Chinese economy;
A gauge of sentiment among sales managers fell to 51.7 in April, according to a survey by London-based World Economics Ltd. Readings above 50 signal conditions are improving.
“After a strong first quarter where we saw steady to rising growth, April has seen it tail off a little but not worryingly so,” Chief Executive Ed Jones wrote in a report. “A drop in prices charged has been most significant but this could be a consequence of slightly slower sales growth and the possibility of a trade war breaking out with the U.S.”
Factory activity moderated, according to China Satellite Manufacturing Index, which slipped to 51.1 from 51.7 in March. The gauge published by New York-based SpaceKnow Inc. tracks commercial satellite imagery to gauge activity levels across thousands of industrial sites.
Financial professionals are upbeat on the economy, but the outlook has further deteriorated amid trade tensions, according to the China Economic Panel, a project of the Centre for European Economic Research in Mannheim, Germany, and Fudan University in Shanghai.
The panel said its main indicator dropped to minus 1 from 1.4 in March. A sub-index of expectations for export growth slumped, and respondents expect a considerable drop in shipments, Michael Schroeder, a senior researcher at the center, wrote in the report.
“Survey results were significantly impacted by international political discussion concerning trade barriers, tariffs, and the looming trade war between the U.S. and China,” he wrote.
The S&P Global Platts China Steel Sentiment Index rose to a 25-month high of 82.78 points out of 100, up from 69.09 in March, on more orders and production. The gauge is based on a survey of about 75 to 90 China-based market participants including traders and steel mills.
“April is a seasonally strong time for steel demand and prices as construction work picks up again in spring,” Paul Bartholomew, senior managing editor for steel and raw materials at S&P in Melbourne, wrote in a report. “The situation is compounded this year due to pent-up demand after the winter constrictions on steel production and construction work.”
Standard Chartered Plc’s Small and Medium Enterprise Confidence Index moderated to 58 in April from a one-year high of 59.1 in March, dragged lower by a slight deterioration in the outlook for the economy, according to the survey of hundreds of companies nationwide.
Growth is expected to decelerate for the rest the year on slower investment growth, deleveraging, and intensifying trade friction with the U.S., Shen Lan, economist at StanChart in Beijing, wrote in the report. “A drastic weakening of the Chinese yuan will be used only as a last resort in a trade war scenario,” she said.