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23 Apr 2013
Forex Flash: Weak Chinese flash PMI suggests growth may trend down in Q2 - Nomura
FXstreet.com (Barcelona) - Nomura economist Zhiwei Zhang notes that the HSBC flash manufacturing PMI dropped to 50.5 in April from 51.6 in March (Consensus: 51.5; Nomura: 52.0), despite positive seasonal factors which usually drives April readings of the PMI up.
He comments that in the past seven years, the PMI in April has risen five times, fallen once and been flat once. On average it rose by 1.2 percentage points (pp) from March to April. Excluding 2009 (an abnormal year when the RMB 4trn fiscal stimulus pushed it up quickly), he notes that it rose by 0.5pp. Both the new orders and new export orders components declined, while finished goods inventory rose. Zhang sees that the fall in the HSBC flash PMI is inconsistent with the recent rise in the MNI China flash business sentiment index (to 59.3 in April from 58.2 in March) and both indicators are highly correlated with the official PMI.
Zhang finishes by commenting, “We maintain our view that GDP growth peaked in Q1 at 7.7% and will trend down through the rest of the year, to 7.5% in Q2, 7.4% in Q3 and 7.2% in Q4 (Consensus expects growth to rebound in Q2 to 8%), as potential growth has slowed to 7.0-7.5% and as the effectiveness of policy easing has been diminished by aggressive stimulus measures taken over the past five years.”
He comments that in the past seven years, the PMI in April has risen five times, fallen once and been flat once. On average it rose by 1.2 percentage points (pp) from March to April. Excluding 2009 (an abnormal year when the RMB 4trn fiscal stimulus pushed it up quickly), he notes that it rose by 0.5pp. Both the new orders and new export orders components declined, while finished goods inventory rose. Zhang sees that the fall in the HSBC flash PMI is inconsistent with the recent rise in the MNI China flash business sentiment index (to 59.3 in April from 58.2 in March) and both indicators are highly correlated with the official PMI.
Zhang finishes by commenting, “We maintain our view that GDP growth peaked in Q1 at 7.7% and will trend down through the rest of the year, to 7.5% in Q2, 7.4% in Q3 and 7.2% in Q4 (Consensus expects growth to rebound in Q2 to 8%), as potential growth has slowed to 7.0-7.5% and as the effectiveness of policy easing has been diminished by aggressive stimulus measures taken over the past five years.”