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UOB Group’s Economist Ho Woei Chen, CFA, assessed the latest set of Chinese data releases.

Key Quotes

“China’s official manufacturing Purchasing Manager’s Index (PMI) expanded for the 6th straight month in August, though the reading came off slightly to 51.0 from 51.1 in July. This was mainly due to the moderation in production (53.5 from 54.0 in July) and a decline in inventory (47.1 from 47.6 in July) which may be due to flooding in parts of China.”

“The official non-manufacturing PMI surged by 1.0 point to 55.2 in August from 54.2 in July, the highest since January 2018. Services sector especially those in retail and tourismrelated industries have been hard-hit by the COVID-19 pandemic. Despite the recovery in the manufacturing activities, retail sales have yet to turn positive by July. The stronger nonmanufacturing PMI in August may assuage concerns about demand-side weakness.”

“The official manufacturing and non-manufacturing PMIs suggest that China’s economic recovery has continued into 3Q20. We maintain our forecast for the GDP growth to accelerate to around 4.9% y/y in 3Q20 from 3.2% y/y in 2Q20. At the same time, we remain vigilant of risks including floods, resurgence in COVID-19 both domestically and in its key markets as well as the US-China relations.”

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