China’s official manufacturing PMI moderated to a weaker-than-expected 51.5 in June after a jump to 51.9 in May (Consensus: 51.7; Nomura: 51.6), notes the research team at Nomura.
Key Quotes
“The fall in June supports our view that the rebound of in May was short-lived. In fact, the year-on-year growth rates for industrial production, investment and retail sales all slowed in May, as end demand has been moderating due to rapidly shrinking credit supply from the shadow banking sector.”
“The 50bp cut to the reserve requirement ratio (RRR) on 24 June showed that the authorities are aware of the downside risks to the economy and have already shifted their policy stance towards more easing.”
“We believe the economy has yet to bottom out and expect things to get worse in coming months before the effect from easing measures becomes visible. We expect more policy easing to be announced soon, with at least another RRR cut on a scale of 100bp before year-end.”
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