CHINA: June PMIs point to moderating economy

 Lisa kommentaar

Both China's official purchasing managers' index (PMI), compiled by the China Federation of Logistics and Purchasing (CFLP), and another PMI series published by HSBC for June, showed that China's economic growth is moderating.

The CFLP PMI fell from 53.9 in May to 52.1 in June, much lower than the market expectation of 53.2. Meanwhile, the HSBC PMI fell from 52.7 in May to 50.4 in June which was its lowest record in 14 months. Anyhow, both PMI readings were still above the boom-bust line of 50, showing that the economy continued to expand from April to May, albeit at a much slower pace than in the previous months.
 
"The moderation in the manufacturing PMI implies slower sequential growth in China's manufacturing sector, partly due to the tightening measures taking effect. But fears about hard landing are overplayed. We expect China to achieve around 9% growth in H2 underpinned by massive ongoing investment and robust private consumption," said the HSBC PMI report for June.
 
The CFLP remained optimistic as well, but it also warned that China's tightening measures on real estate are starting to cool domestic investment, and at the same time the European debt crisis and the prospect of a stronger RMB are going to eat into China's export in H2. So, the CFLP suggested that policy makers in Beijing slow their pace of exiting stimulus and adopting tightening measures, and instead shift slightly back to loosening credit policies and speeding up of construction of low-income housing.