The headline from Dow Jones Newswires blares that the HSBC final PMI (Purchasing Managers Index) “signals economy recovering.” However,
the index value is still below the dividing line defining
expansion/contraction at 50 with a reading of 49.3 for April, up from
48.3 in March. So the direction of the PMI is good, improving
month-over-month. But technically “recovering” is an overstatement
since the numbers are actually saying there is still a contraction, but
the contraction is less than the month before. It is the sort of thing
that might be called “less bad.”
Follow up:
Yesterday GEI News covered the reports of the official PMI which is issued by the China Statistics Bureau and Logistics Federation.
That report indicated moderately strong growth with a reading of 53.3
in April, up from 53.1 in March. That index showed the fifth
consecutive month of economic expansion.
There
has been some concern that the two PMI readings have diverged from each
other over the past six months. But economists seemed convinced now
that even the lower HSBC number is consistent with a strengthening
economy in China. From The Wall Street Journal:
"China's
real economy is recovering," said Lu Ting, an economist at Bank of
America-Merrill Lynch. "The chance is slight for China to post lower
growth in the second quarter, compared to 8.1% growth in first quarter,"
he added.
Despite
the recent improvement, Lu still expects Beijing to further release
liquidity by cutting the reserve requirement ratio for banks twice in
the rest of the year and boost investment in infrastructure and public
housing.
Meanwhile,
HSBC economists said they expect the Chinese economy to bottom out in
the second quarter. "With easing measures starting to work and further
measures on the way, China's growth looks set to recover to over 8.5% in
the second half," HSBC economists said in a note.
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