China’s Flash PMI for February is out and registered a small increase to 49.7, up 0.9 from January. The index increased largely on the back of resumed production, forward indicators were unchanged with domestic new orders still contracting slightly and new export orders kicking down into contractionary territory. China’s manufacturers appear to be under pressure both internally and externally. HSBC had this to say:
Growth remains on track of slowdown, despite the marginal improvement in the headline flash PMI led by quickened production after the Chinese New Year. With a meaningful rebound of domestic demand not in sight, external weakness is starting to bite, adding more downside risks to growth. The PBoC, after delivering this year’s first RRR cut, should step up policy easing as inflation pressures continue to ease.
So, this is an ordinary report but not horrible by any means. If anything it offers another small piece of evidence for my thesis that China is confronting a long and difficult landing rather than a severe drop in growth. There is no doubt that for those looking for a quick rebound, this report will be disappointing.
