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Official Chinese services and HSBC manufacturing PMIs drop in May - Nomura

FXstreet.com (Barcelona) - Nomura economist Zhiwei Zhang notes that the official services PMI dropped to 54.3 in May from 54.5 in April.

He begins by noting that of the subcomponents, new orders fell to 50.1 from 50.9, input prices rose to 54.4 from 51.1 and output prices rose to 50.7 from 47.6. This data set contrasts with the official manufacturing PMI which rose unexpectedly to 50.8 from 50.6. He notes that the output and inventory subcomponents of the official manufacturing PMI rose by 0.7 and 0.9 points, respectively, but the new orders component only rose by 0.1, which suggests demand has not recovered.

Moreover, he adds that the business expectation component fell to 56.3 in May from 59.3 in April and 65.5 in April, suggesting that corporate expectations for strong investment after the leadership transition have been disappointed. He writes, “Separately, the HSBC manufacturing PMI fell below the 50 threshold, at 49.2 in May, from 50.4 in April, lower than the flash estimate of 49.6. Overall, we therefore remain cautious on China‟s economic outlook and maintain our forecast of GDP growth to slow to 7.5% in Q2 from 7.7% in Q1.”

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