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China: Mixed signals from PMIs – Deutsche Bank

FXStreet (Delhi) – Research Team at Deutsche Bank, suggests that the signals from the two Chinese PMIs remain mixed in November.

Key Quotes

“The official manufacturing PMI dropped to 49.6 from 49.8 in October. The Caixin manufacturing PMI rose to 48.6 from 48.3. The official service PMI rose to 53.6 from 53.1. The Caixin service PMI will be released on Dec 3.”

“The components of the two manufacturing PMIs also show mixed signals. The official manufacturing PMI shows a broad based decline, while most of the components in the Caixin PMI improved. This is puzzling to us. The official PMI has a breakdown by the size of enterprises. The PMI for large firms improved, while for small and medium sized firms it dropped. This is even more puzzling as the Caixin PMI likely has less coverage of the large state owned enterprises.”

“The mixed signals cast downside risks to our forecast of 7.2% GDP growth in Q4. These signals suggest the economy stabalized, but they do not show a clear pattern of rebound. The key question on our mind is: will the economy rebound or are we expecting too much from the effect of policy easing and strong land sales?”

“The government will release data on November industrial production, FAI, and retail sales on Dec 12. The leading indicators in this set of data release such as new housing starts and funds available for FAI will shed light on the economic outlook.”

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