China: Expect stronger manufacturing PMI – ING

Iris Pang, Economist at ING expects a stronger Chinese manufacturing PMI numbers, suggesting exports and GDP will hold up pretty well in 2H.

Key Quotes

“The official manufacturing PMI should slightly increase, probably due to an increase in export and domestic orders (INGF: 51.9; consensus: 51.5; prior: 51.7). We maintain our view that Chinese manufacturing activities are on a rising trend as they approach the holiday season and as a result of increasing infrastructure activity.”

“We also expect that input prices could rise with business sentiment, stemming from reforms that are cleaning up overcapacity sectors.”

“The Caixin manufacturing PMI should also show similar rising trends (INGF: 51.8; consensus: 51.5; prior: 51.6) for the same reason that the export season will bring more orders and output for smaller manufacturing companies.”

“However, the official non-manufacturing PMI will likely decelerate moderately (INGF: 52.5; prior: 53.4). This would be largely a result of fewer real estate service activities, which has dominated the trend in non-manufacturing PMI since the tightening of housing policies.”

“Looking forward, as the export season has arrived, we would continue to see improvements in manufacturing activities, which suggest that 2H exports and GDP will hold up pretty well. Our GDP forecasts for 3Q and 4Q are 6.8% YoY and 6.7% YoY respectively, compared with 6.9% YoY in 1H.”