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Analysts at Nomura note that China’s official manufacturing PMI rebounded to 51.9 in May from 51.4 in April and though their forecast was above consensus (Consensus: 51.4; Nomura: 51.5), they were still a bit too conservative.

Key Quotes

“The rebound in May was driven by the “factory output” subindex, especially by ferrous metal processing. Among sub-indices by enterprise size, big enterprises led the rise. Today’s headline and breakdown PMI data confirm our view that suppressed production over the winter and restocking in Q2 could support a rebound in the PMI and industrial production. However, better PMI readings may be short lived, as the growth of end-demand, such as infrastructure and property investment, has slumped in recent months, due at least in part to the government’s deleveraging efforts. We expect the PMI to fall in H2 and the government to continue its moderate policy easing in coming months.”