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The sharp drop in China’s manufacturing PMI in February reinforces the view of analysts at ANZ Research that the normalisation in economic activity will be delayed, as reflected in high-frequency growth trackers.

Key quotes

“There has been a huge contraction in both demand and supply, as reflected in the steep declines of sub-30 seen in sub-indices such as production, new orders, and new export orders to 27.8, 29.3 and 28.7, respectively.”   

“We see the economy contracting by 2% in Q1 on a sequential basis and revise down our forecast of Q1 GDP to +2% y/y (previously 3.2−4.0%).” 

“Chances of a v-shaped rebound are low. We cut our forecast for 2020 to 4.1%. The government has targeted aid to affected sectors and enterprises, rather than using stimulus.”