24 Mar 2015
Decline in HSBC PMI suggests Chinese GDP growth could decline below 7% y/y in Q1 – Danske
FXStreet (Barcelona) - With China’s HSBC manufacturing PMI declining below consensus to 49.2, Senior Analyst at Danske Bank, Flemming J. Nielsen, views that the government’s 7% GDP growth target for 2015 looks difficult to achieve.
Key Quotes
“The flash estimate for China’s HSBC/Markit manufacturing PMI in March declined by more than expected to 49.2 (consensus: 50.5, Danske Bank Markets: 50.6) from a final reading of 50.7 in February. This is the lowest level for the HSBC/Markit manufacturing PMI since April 2014.”
“The weak overall PMI suggests that the improvement in February was just a temporary ‘blip’, possibly related to the timing of the Chinese New Year holiday being unusually late in February.”
“It also brings the HSBC/Markit manufacturing PMI more in line with the very weak industrial production data for January and February, albeit a substantial gap remains.”
“The poor PMI, in line with recent sluggish hard data, also confirms that the start to 2015 has been very weak. The data so far suggests that GDP growth could decline below 7.0% y/y in Q1 from 7.3% y/y in Q4 last year. Hence, the government’s 7% target for GDP growth in 2015 already appears difficult.”
“We will have to cut our 7.2% growth forecast for 2015.”
“Policy wise, the implication in our view is more monetary and fiscal easing. We expect the leading interest rate to be cut by another 25bp in Q2 and the reserve requirement for commercial banks to be cut by 150bp in the coming months.”
Key Quotes
“The flash estimate for China’s HSBC/Markit manufacturing PMI in March declined by more than expected to 49.2 (consensus: 50.5, Danske Bank Markets: 50.6) from a final reading of 50.7 in February. This is the lowest level for the HSBC/Markit manufacturing PMI since April 2014.”
“The weak overall PMI suggests that the improvement in February was just a temporary ‘blip’, possibly related to the timing of the Chinese New Year holiday being unusually late in February.”
“It also brings the HSBC/Markit manufacturing PMI more in line with the very weak industrial production data for January and February, albeit a substantial gap remains.”
“The poor PMI, in line with recent sluggish hard data, also confirms that the start to 2015 has been very weak. The data so far suggests that GDP growth could decline below 7.0% y/y in Q1 from 7.3% y/y in Q4 last year. Hence, the government’s 7% target for GDP growth in 2015 already appears difficult.”
“We will have to cut our 7.2% growth forecast for 2015.”
“Policy wise, the implication in our view is more monetary and fiscal easing. We expect the leading interest rate to be cut by another 25bp in Q2 and the reserve requirement for commercial banks to be cut by 150bp in the coming months.”