- This morning, China’s official NBS manufacturing and non-man. PMIs jumped back into expansionary territory.
- While this confirms China’s economy has likely started to bottom out from the Covid-19 crisis, the outlook will depend on three factors:
- The ongoing normalization in production and consumer demand: While production will likely reach normal capacity utilization in mid-April (provided new corona cases remain on low levels) private consumption is still lagging.
- The global recession: We strongly revised down our 2020 global GDP forecasts (to -1%) which will result in weak Chinese exports.
- An additional fiscal package: Last Friday’s politburo meeting fueled expectations that a package will be announced shortly. We expect total stimulus of around 3.5% – 4% of GDP.
- In sum, we see China’s growth subdued this year at 2.5%. We stress that this forecast comes with an unusually high degree of uncertainty.