China: Plunging PMI ahead of the Pig’s year – Nordea Markets

Amy Yuan Zhuang, analyst at Nordea Markets, suggests that the Chinese economy has little to celebrate when entering the Pig’s year next week as the Caixin/Markit PMI for manufacturing index fell unexpectedly to 48.3 from 49.7 in January.

Key Quotes

“The Caixin PMI is a better bellwether for the economy than its official counterpart, as it surveys mostly smaller and private companies, which account for a bigger share of the GDP and jobs created. The official PMI usually performs better than the Caixin survey, as it targets state-owned enterprises, which benefit more from government stimulus.”

“A look into sub-indices of the survey shows that domestic sentiment has deteriorated more than the external. Export orders expanded for the first time in 10 months, likely thanks to progress in China-US trade talks that gave hope for a trade deal before 1 March.”

“The numbers today are also bad news to the world economy. China’s import demand is closely related to its domestic manufacturing activity. When the latter is contracting, China will not likely boost its imports, especially not of intermediate manufacturing goods.”