China: A sound result of PMI - Westpac

According to Elliot Clarke, Research Analyst at Westpac, for the manufacturing sector, the month of March was mixed as the official NBS measure bounced back to 51.5, in line with the level seen in December, but the Caixin variant fell from 51.6 to 51.0.

Key Quotes

“On a quarterly basis, a similar result is evident: the NBS PMI was a little lower in Q1 at 51.0 (from 51.7 in Q4); the Caixin survey marginally higher at 51.4 (from 51.1).”

“Looking ahead, total and external new orders are little changed from 2017 and broadly in line with their respective long-run average levels.”

“These outcomes then suggest overall that the uptrend in manufacturing momentum has come to an end and that growth in the sector is stabilising. Given recent trade ructions, the risk is that growth slows.”

“Turning to the services sector, headline activity and new orders are both below average. There are also signs that downside risks are growing. Authorities’ restrictions on credit and the housing sector are arguably weighing on service sector activity, and this is likely to persist through 2018.”

“All told, the Q1 2018 China PMI outcomes point to a topping out in the growth pulse and a shifting of the risks to the downside. GDP growth will remain robust, but in 2018 is set to be much closer to 6% than 7%.”