First Insights: China: HSBC flash manufacturing PMI rebounds in March

Economics Research | Asia Ex-Japan

21 March 2013

First Insights: China: HSBC flash manufacturing PMI rebounds in March

The HSBC China flash manufacturing PMI rebounded to 51.7 in March from 50.4 in February, much stronger than expected (Consensus: 50.8; Nomura: 51.0). The 1.3 percentage point (pp) jump in March cannot be explained by seasonal factors alone. Since the HSBC PMI data started in 2005, there have been four years when the lunar new year holiday fell in February; in these years, the PMI rose by an average of 0.6pp in March.

The output subcomponent rose to 52.8 in March from 50.8 in February. Moreover, the new order component jumped to 53.3 from 51.4, and the new export order subcomponent rose to 51.1 from 50.3, both of which bode well for future production. The PMI’s new export orders, while higher, still do not seem consistent with the exceptionally strong export growth of 23.6% y-o-y in January/February, and we do expect some payback. Prices indexes, including the input prices index and the output prices index, fell below 50 in March, possibly implying an easing in prices after the lunar new year.

The strong reading in March may suggest that February’s weakness was mainly due to the distortion from the lunar new year holiday. That said, some of the core data, such as industrial output and retail sales were weak in January/February, which leads us to still believe that the economic recovery is a shallow one. Another leading indicator, the flash MNI indicator, will be released tomorrow.

Economists
Zhiwei Zhang