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24 Sep 2014
China's government may step up policy easing - Nomura
FXStreet (Bali) - As Nomura notes, Tuesday's HSBC flash PMI in China revealed weakening employment conditions, implying that the government may step up policy easing.
Key Quotes
"The employment sub-index of the HSBC flash PMI fell further to 46.9 in September, the lowest since it hit 45.0 in January 2009. The sub-index captures the change in employment level in the manufacturing sector from August to September, suggesting higher employment pressures."
"While there is no comprehensive official high-frequency indicator of China‟s employment situation, the PMI‟s employment sub-index may provide some fair insight. The two sub-indexes in the official and HSBC PMIs show a high correlation of 0.74* and we expect the official PMI (1 October) to indicate the same message."
"Policymakers have paid particular attention to employment dynamics. So far, the job market remains fairly firm despite weaker growth; the labour demand-to-supply ratio remained above one in Q2. This may partly reflect supply – a shrinking working-age population – but may also be due to job market data being a lagging indicator of economic activity."
"We continue to expect a step up in policy easing, including (RRR) cuts by 50bp each quarter from Q4 2014 to Q4 2015."
Key Quotes
"The employment sub-index of the HSBC flash PMI fell further to 46.9 in September, the lowest since it hit 45.0 in January 2009. The sub-index captures the change in employment level in the manufacturing sector from August to September, suggesting higher employment pressures."
"While there is no comprehensive official high-frequency indicator of China‟s employment situation, the PMI‟s employment sub-index may provide some fair insight. The two sub-indexes in the official and HSBC PMIs show a high correlation of 0.74* and we expect the official PMI (1 October) to indicate the same message."
"Policymakers have paid particular attention to employment dynamics. So far, the job market remains fairly firm despite weaker growth; the labour demand-to-supply ratio remained above one in Q2. This may partly reflect supply – a shrinking working-age population – but may also be due to job market data being a lagging indicator of economic activity."
"We continue to expect a step up in policy easing, including (RRR) cuts by 50bp each quarter from Q4 2014 to Q4 2015."