24 Mar 2015
HSBC flash PMI for China consistent with weak growth - Nomura
FXStreet (Bali) - Nomura Economics Team reviews the disappointing HSBC flash PMI for China on Tuesday, noting that the drop was led by new orders and output, and that the data is consistent with their view that growth momentum remains weak in Q1.
Key Quotes
"The HSBC flash PMI for China fell sharply by around 1.5 percentage points (pp) to 49.2 in March from 50.7 in February, which was a much weaker-than-expected result (Consensus: 50.5; Nomura: 50.3). The drop was consistent with the MNI business sentiment index but much weaker than the historical average rise of 0.07pp from February to March over 2010-14."
"The lower reading was led by new orders and output; the output sub-index fell by 0.9pp to 50.8 in March from 51.7 in February, while the new orders sub-index fell more sharply by 1.9pp to 49.3 from 51.2. The new export orders sub-index, however, rebounded slightly by 0.5pp to 49.0 from a 12-month low of 48.5 in February, which implies that worsening overall demand might have been more driven by sluggish domestic demand."
"Meanwhile, the input prices sub-index rose by 1.7pp to 44.7 in March from 42.9 in February and remains below the expansion/contraction threshold of 50, which suggests deflationary pressures on the producer side continued and is possibly another sign ofbsluggish growth momentum."
"This HSBC flash PMI is consistent with our view that growth momentum remains weak in Q1, and we maintain our forecast that GDP growth will slow to 6.9% in Q1 2015 from 7.3% in Q4 2014. We also expect more policy easing, with three more interest rates cuts and three more reserve requirement ratio cuts over the remainder of 2015."
Key Quotes
"The HSBC flash PMI for China fell sharply by around 1.5 percentage points (pp) to 49.2 in March from 50.7 in February, which was a much weaker-than-expected result (Consensus: 50.5; Nomura: 50.3). The drop was consistent with the MNI business sentiment index but much weaker than the historical average rise of 0.07pp from February to March over 2010-14."
"The lower reading was led by new orders and output; the output sub-index fell by 0.9pp to 50.8 in March from 51.7 in February, while the new orders sub-index fell more sharply by 1.9pp to 49.3 from 51.2. The new export orders sub-index, however, rebounded slightly by 0.5pp to 49.0 from a 12-month low of 48.5 in February, which implies that worsening overall demand might have been more driven by sluggish domestic demand."
"Meanwhile, the input prices sub-index rose by 1.7pp to 44.7 in March from 42.9 in February and remains below the expansion/contraction threshold of 50, which suggests deflationary pressures on the producer side continued and is possibly another sign ofbsluggish growth momentum."
"This HSBC flash PMI is consistent with our view that growth momentum remains weak in Q1, and we maintain our forecast that GDP growth will slow to 6.9% in Q1 2015 from 7.3% in Q4 2014. We also expect more policy easing, with three more interest rates cuts and three more reserve requirement ratio cuts over the remainder of 2015."