China: Recovery seen picking up pace in Q2 – UOB

UOB Group’s Economist Ho Woein Chen, CFA, reviewed the latest PMI prints in the Chinese economy.

Key Quotes

“China’s official Purchasing Manager’s Index (PMI) for both the manufacturing and nonmanufacturing stayed in the positive territory (above-50 reading) in April after having turned around sharply in March. However, the official manufacturing PMI fell 1.2 point to 50.8 in April (consensus forecast: 51.0; March: 52.0) while the non-manufacturing PMI edged up 0.9 point to 53.2 in April (consensus forecast: 52.5; March: 52.3).”

“The components of the official manufacturing sub-index showed a worrying but not unexpected drop in new export orders to 33.5 in April from 46.4 in March though it was still holding above the record-low of 28.7 in February.”

“Overall, the outlook for manufacturing as seen in both the official and Caixin surveys weakened in April, stemming from the COVID-19 lockdowns in a number of global economies even as China has gradually resumed its factory production. Notably, Wuhan, the epicentre of the coronavirus outbreak in China, had reopened on 7 April after a 76-day lockdown. Given the relatively stronger outlook for services sector as shown in the April’s official PMI, we are cautiously optimistic that the recovery momentum in China will remain in place into the second quarter. The services industries account for 54% of the economy and could continue to improve with government’s support for consumption and investment.”