Brian Jackson, China Economist, IHS Global Insight
JAKARTA - IHS Global Insight, a research institution, has provided updates on the Chinese economy. Followings are the highlights:
January-March purchasing managers’ index (PMI) is consistent with weaker industrial and services GDP, but stronger construction output, when GDP is reported in mid-April. Click through for more data and analysis.
Key Points:
- China’s official manufacturing purchasing managers’ index (PMI) rose to anine-month high in March. The improvement came primarily from new orders expanding (previously contracting) and output expanding faster. New orders’ improvement is due to new export orders, which expanded for the first time in 18 months. Authorities attributed the output improvement to a seasonal bounce following the February holidays and stronger performance in high-end manufacturing, which jumped 3.5 points to 52.4. Small enterprise PMI improved the most, by 3.7 points to 48.1, although large enterprise PMI remained the only ownership segment in expansion.
- Official non-manufacturing PMI rose to an eight-month high. Non-manufacturing orders showed the largest improvement, expanding for the first time in threemonths, while new export orders were nearly unchanged and remained in contraction, in contrast with manufacturing results. Authorities noted that most of the improvement came from construction PMI, which rose 2.8 points to 58.0, while services PMI only rose 0.9 point to 53.1. Within services segments, such as retail, catering, shipping and aviation, all declined after a seasonal surge with the February holidays.
- Price conditions in both manufacturing and non-manufacturing improved markedly. Manufacturing materials price PMI rose 5.1 points to 55.3, a 37-month high. Non-manufacturing intermediate price index rose to a 10-month high, as did the non-manufacturing prices charged index.
Outlook
Pricing sentiments are consistent with our forecast of more moderate industrial deflation in 2016, and inflation in some industrial sectors. China’s official producer price index (PPI) is likely to rise when reported on 11 April.
Stronger export orders indicate that merchandise exports will improve after a double-digit contraction during January-February; customs officials already hinted that March and Q2 trade data is expected to improve substantially. March trade data is expected on 13 April.
With those positives noted, officials’ emphasis on high-end manufacturing indicates that heavy manufacturing may still not enjoy a significant improvement in output indicators, given substantial oversupply. PMI data point for January-Marchis consistent with a slowdown in both industry and services over the entire quarter, but an improvement in construction output and building momentum entering the second quarter. China will report Q1 GDP on 15 April and a sector breakdown on 16 April. (*)