The Chinese economy is in deep recession, whatever the official numbers say. The Caixin PMI is in dire straights, via Pantheon:
No relief in sight for China’s service sectorA decent drop was on the cards, given the tightening of zero-Covid restrictions, and the 6.7 point drop in the equivalent official PMI. But the Caixin survey had already fallen further and faster, generating expectations that the pace of decline would be more moderate in April. No such luck.Alongside the drop in service sector activity, which constitutes the headline reading, there was an even sharper drop in new orders, to 38.4, from 45.9, with new export orders also falling considerably. In fact, every single subindex fell in April, including prices. Output prices, at 48.5, from 50.8, recorded their first sub-50 reading—indicating falling prices—since August. Employment, meanwhile, shrank for the fourth consecutive month, implying government support for firms is having limited effect.As a reminder, the Caixin index has a more private sector, SME, and coastal skew than the NBS survey. The situation in Shanghai, in particular, creates a heavy headwind. So far, only very limited easing is underway, with a goal of zero community transmission creating a high bar for further reopening. It is unlikely the service PMI will see much, if any, improvement in May.Our chart shows the key measures of service sector activity, both easily at their worst since the first outbreak, back in early 2020.
The property crash and OMICRON lockdown is the culprit. Nothing will change. Sinocism:
The Standing Committee met today and made clear to anyone still not paying attention that it has decided to continue with the “dynamic zero-Covid” policy. “Persistence is victory 坚持就是胜利” the meeting declared.