There’s a pulse but little response
China’s latest PMI data came out today, and the results show little response to the recent infrastructure stimulus package announcements.
According to the HSBC data, China’s PMI came in at 49.2. This is a tiny improvement on April’s 48.9, but still well into contraction territory. Meanwhile the official PMI published by China’s Bureau of Statistics shows that May was 50.2, up very slightly from April’s 50.1.
The concern about these numbers is that the government’s grand plan to drive mega projects such as the “One Belt One Road” and the “Jing-Jin” megacity was made at the end of April. Factories and developers had the full month to start moving things along.
Of particular concern was that factory output dropped below the 50 breakeven mark, while new export orders shrank to only 46.7.
In truth, the PMI data is not a primary indicator of the success or otherwise of the success of infrastructure announcements, nor of the RRR and interest rate cuts that have been executed recently. The first real data on those moves may not reveal itself until we see the Q3 GDP number in October. But it’s hardly an auspicious start to the new month, and reflects how much China needs to see some results soon.
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