China: Growth momentum on track – Standard Chartered

China’s official manufacturing PMI fell marginally by 0.1ppt to 51.4 in April, suggesting still-solid performance in the sector, according to analysts at Standard Chartered.

Key Quotes

“The production sub-index was flat at 53.1, indicating stable production activity. We expect industrial production growth to have picked up to 6.5% y/y in April from 6.0% in March. The non-manufacturing PMI rose to 54.8 in April from 54.6 prior, with robust activity in services and construction. YTD growth in fixed asset investment (FAI) likely moderated to 7.3% y/y as of April from 7.5% a month earlier on softer real-estate investment. We expect retail sales growth to have remained resilient.”

“CPI inflation likely eased further in April, to 2.0% y/y from 2.1% in March, on softer food inflation. Interim data suggests that food prices dropped in April. PPI inflation likely picked up to 3.4% y/y after slowing for five consecutive months. The PMI producer price index rebounded to 50.2 in April from 48.9 prior. We expect exports to have recovered and import growth to have moderated in April, causing the trade balance to return to a surplus of USD 35bn.”

“We expect FX reserves to have fallen to USD 3.103tn in April due to negative FX valuation and mark-to-market valuation effects.”