Chinese HSBC Flash PMI eased to 48.1 in March from 49.6 the previous month, the weakest reading in four months, and the fifth consecutive sub-50 reading.
A report by SocGen analyst Wei Yao says that latest PMI figures show deterioration across all sub-sections. Output, orders and employment all showed faster contraction in March than February.
Looking forward, Wei says the official number will not look as soft as the HSBC figure, something we explained previously. But Wei insists this is only because of its inadequate seasonal adjustment:
“We look for the headline number to tick up to 51.2, marginally above the 51 reading of February. However, the March readings are typically more than 3 points above those of February, which was even the case in 2009 when the Chinese economy was experiencing sharp deceleration. Stripping out this effect, our forecast for the March reading would actually signal contraction in China’s manufacturing activity, and thus consistent with the HSBC PMI.”
China bulls have said that the slowdown is all part China’s plan to cool the economy and avoid property bubbles. But the opposite camp argues that its unclear how much of a handle the government has on this.
Here’s a chart from SocGen that shows broad-based weakness in the HSBC flash PMI report:
Photo: Societe Generale