China’s official PMIs jumped back into expansionary territory

China’s official NBS PMIs bounced back in March. The manufacturing PMI rose to 52.0, up from 35.7, while the non-manufacturing increased to 52.3 after 29.6 in February. By their very construction, a strong rebound had to be expected. PMI surveys essentially ask whether firm’s businesses have been better or worse compared to the previous month.

Highlights:

  • 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.

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CHINA’S OFFICIAL PMIS JUMPED BACK INTO EXPANSIONARY TERRITORY

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