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Analysts at Standard Chartered note that China’s official manufacturing PMI stayed at 52.0 in December, indicating another month of expansion in activity.

Key Quotes

“The sub-indices suggest that production accelerated further and external demand improved. Average manufacturing PMI picked up from 49.7 in Q3 to 49.9 in Q4, pointing to an improvement in growth momentum and sentiment. Meanwhile, the non-manufacturing PMI moderated 0.9ppt to 53.5 after a jump in November. Construction activity slowed on weather and seasonal factors.”

“We expect industrial production (IP), fixed asset investment (FAI) and retail sales YTD growth to have remained flat at 5.6% y/y, 5.2% y/y and 8.0% y/y, respectively, in December. As a result, quarterly average IP growth may have improved, retail sales remained stable and FAI eased from Q3.”

“Export and import growth may have rebounded significantly. Sentiment improved on the outcome of the ‘phase one’ trade agreement. The new export orders PMI recorded its first above-50 reading since June 2018 in December. In addition, early Lunar New Year holidays (in January this year versus February 2019) may have resulted in frontloading of shipments.”

“CPI inflation likely inched up 0.1ppt to 4.6% y/y in December on higher non-food inflation. PPI deflation may have eased to 0.4% y/y, largely on base effects. The central bank net injected sizeable liquidity into the market to meet seasonal demand, likely leading to higher M2 growth. We expect credit growth to have remained stable, supporting the financing of SMEs and the private sector.”