Market Insight – China PMI Watch

All eyes are on China this week as the world’s largest economy comes under the spotlight as it delivers a raft of data in the form of manufacturing and non-manufacturing PMIs for this month.

According to the head of AP Moller-Maersk. The world’s second-largest container shipping group, China’s economic rebound is weaker than expected as consumers emerge “stunned” from pandemic-led disruptions and a real estate meltdown last year.

Vincent Clerc also added that trading volumes associated with the Chinese economy remained resilient with little sign of negative impact from US-led efforts to “decouple” from China.

With that in mind, expectations are set fairly low for this week’s releases. The official NBS Manufacturing PMI increased to 52.6 in February of 2023 from 50.1 in the previous month, exceeding market estimates of 50.5.

This was the second straight month of expansion in factory activity and the fastest pace since April 2012, buoyed by Beijing’s recent decision to exit from a zero-COVID policy.

Both new orders and buying levels grew for the second straight month, and at steeper paces. Also, output (56.7 vs 49.8), export sales (52.4 vs 46.1), and employment (50.2 vs 46.7) all returned to growth.

On the price front, input cost rose for the sixth month in a row and at the fastest pace since last May (54.4 vs 52.2); while output charges rose. Inflation has been a big concern for markets.

This week we also see the other side of the spectrum in the form of the NBS Non-Manufacturing PMI for China, which increased to 56.3 in February 2023 from 54.4 a month earlier.

Last month’s reading pointed to the highest reading since March 2021, boosted by the removal of a zero-COVID policy. The latest result also marked the second straight month of expansion in the service sector.

On inflation, input cost slowed slightly (51.1 vs 51.5) while output prices went up for the first time in eleven months (50.8 vs 48.3). Lastly, sentiment remained upbeat, with the reading staying at a high level of nearly 65.