China: Resilience and strength shown in April PMI - Westpac

Elliot Clarke, Research Analyst at Westpac, explains that China’s official PMIs showed resilience and strength in April, having previously come under pressure at the beginning of the year. 

Key Quotes

“Though the headline measure edged down in April, from 51.5 to 51.4, the overall tone of the manufacturing report was positive.”

“At the current level, the headline index is only 0.6ppts below its long-run trend, up from January and February’s average of –1.2ppts and broadly in line with 2017’s –0.4ppts.”

“Based on the GDP and investment data, domestic demand growth will remain a positive support for the Chinese manufacturing sector through 2018. However, the pass-through of activity growth to employment remains limited, thanks to a continued focus on efficiency and profitability.”

“Turning to the services sector, momentum has been softer since the end of the lunar new year holidays in February. Still, the expansion looks to be continuing at a similar pace to that seen during 2017. Hence, growth is best regarded as robust.”

“Looking ahead, the desire of authorities to focus on the ‘quality’ of growth will linger in the minds of many businesses as a risk, particularly with respect to the availability and price of credit.”

“With PMIs across the globe looking as though they have now peaked, it is likely that China’s own PMIs will edge lower in coming months as external demand eases and domestic demand sustains its current pace of growth.”