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China official PMI data for May showed manufacturing new orders contract for the first time in four months as overseas sales declined for the twelfth straight month. China saw relatively fast growth momentum in the service sector.

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The foreign exchange and stock indices did not sell intially on this data in April aggressively on the rationale that China will ease further and secondly there is more impetus to China to seek a trade deal of the U.S.  However the trade war created more friction and the markets responded. We are now back at the same point, China has also responded with a "white paper' on trade.

China May Purchasing Managers' index (PMI) of China from the National Bureau of Statistics (NBS).

  • Composite PM 53.3, down 0.1 percentage point from previous month, as the country's corporate business activities remained basically steady.
  • Manufacturing PMI 49.4, down 0.7 percentage point from previous month.
  • Non-manufacturing PMI unchanged from the previous month at 54.3, showing its continuous momentum of steady growth.

A reading above 50 indicates expansion, while a reading below reflects contraction.

Manufacturing PMI

  • The drop in manufacturing PMI was led by the new orders sub-index falling with lower new export orders. This was the first contraction in manufacturing activity since February, amid escalating trade tensions with the US.
  • New orders contracted for the first time in four months 49.8 vs 51.4 in April, overseas sales declined for the twelfth straight month and was at a steepest rate in three months 46.5 vs 49.2.
  • Employment fell further (47.0 vs 47.2). Output growth slowed to a 3-month low (51.7 vs 52.1) and buying levels grew the least since a drop in February (50.5 vs 51.1).
  • Input prices went up at the softest rate in three months despite marking the fourth straight month of gains (51.8 vs 53.1), while output charges declined for the first time since February(49.0 vs 52.0).
  • Business sentiment fell to its lowest in four months (54.5 vs 56.5).
  • Business Confidence averaged 51.85 Index

China NBS Manufacturing PMI

Points from 2005 until 2019, reaching an all time high of 59.20 Index Points in April of 2008 and a record low of 38.80 Index Points in November of 2008.

Zhou Maohua, analyst with China Everbright Bank said "There is no need to worry too much about short-term economic fluctuations in the data, as it takes time for stimulus policies by the government to take effect. It's just uncertain where external demand will go. We can't say it is definitely slumping." Zhou said that the Chinese economy is still running within a reasonable range and the changes of economic structure should be paid more attention to.

Non Manufacturing PMI

  • China saw relatively fast growth momentum in the service sector, with the indices for railway and air transport, post, accomodation, telecom, broadcast, internet software information technologies all standing above 60.
  • Construction services fell by 1.5 percentage points to 58.6, still in a range of fast expansion.
  • New orders expanded at the softest rate since November last year (50.3 vs 50.8 in April); while new export orders declined for the third straight month, which was at a steeper rate(47.9 vs 49.2)
  • Employment dropped the most in nine months (48.3 vs 48.7).
  • In terms of prices, input cost inflation rose the least since January (52.2 vs 53.0), while output charges fell for the first time in four months(49.9 vs 50.5. Business sentiment weakened further to a four-month low (60.2 vs 60.3).

China Non Manufacturing PMI

The non-manufacturing PMI reflected the continuous upgrade in consumption while high-end equipment manufacturing showed great prospects, indicating an upgrade in the country's manufacturing sector, Zhou said.

Non Manufacturing PMI in China averaged 55.74 percent from 2007 until 2019, reaching an all time high of 62.20 percent in May of 2007 and a record low of 50.80 percent in December of 2008. T

Recap of Soft April Chinese Data

April’s Caixin PMI survey:

Service-sector expansion drove Chinese growth, suggesting that fiscal stimulus is working its way through the economy. Analysts will eagerly watch the May updates for the first view of business activity after a renewed flare-up of US-China trade discourse, Will there be further clues as to whether greater policy support is likely.

China April Retail sales:

  • 7.2% y/y missed expected 8.6%, prior 8.7%
  • 8.0 % YTD y/y expected 8.4%, prior 8.3%
  • This retail sales growth was the slowest since May 2003.

China April Industrial production:

  • 5.4% y/y missed expected 6.5%, prior 8.5%
  • 6.2 % YTD y/y expected 6.5%, prior 6.5%

China Fixed asset investment (excl rural) for April

  • 6.1% y/y missed expected 6.4%Fixed Asset Investment in China averaged 19.73 percent from 1996 until 2019, reaching an all time high of 53 percent in February of 2004 and a record low of 5.30 percent in August of 2018.

China Private sector investment for April

  • (accounts for around 60% of investment)
  • +5.5% under what it had been tracking at +6.4% in Q1

China Public investment for April

7.8 percent  beat the 6.7 percent expected

Source: NBS, Trading Economics

From The TradersCommunity News Desk

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