China: Official PMI falls in December - Nomura

Research Team at Nomura notes that the China’s official manufacturing PMI fell to 51.4 in December from 51.7 in November (Consensus: 51.5; Nomura: 51.0). 

Key Quotes

“By component, the decline was mainly from the output side (down 0.6 percentage points (pp) to 53.3 in December), raw material inventory (-0.4pp) and the employment subindices (-0.3pp; Figure 2). The new orders sub-index remained unchanged at 53.2 while the new export orders sub-index fell by 0.2pp to 50.1, indicating that domestic demand likely remained resilient. The purchasing price sub-index rose further to 69.6, suggesting upside inflationary pressures on the supply side.”

“Today’s data suggest growth momentum moderated slightly in December, in our opinion. Moreover, the quality of growth seems to have deteriorated further, as the official PMI for small enterprises fell further into contractionary territory while that for medium-sized enterprises fell below the contraction/expansion threshold of 50.”

“December data forecasts

We expect industrial production growth (data on 20 January) to tick down to 6.1% y-o-y in December from 6.2% in November, fixed asset investment growth to edge down to 8.2% y-o-y (ytd) from 8.3% in November, and retail sales growth to rise 0.2pp to 11.0% y-o-y in December, partly on a low base last year.” 

“We forecast CPI inflation (10 January) to ease to 2.0% y-o-y in December from 2.3% in November, due to lower food price inflation. PPI inflation may have jumped further to 4.8% y-o-y from 3.3% as prices continue to rise and a low base continues to have an effect.”

“We expect export growth in USD terms (8-13 January) to slow to -8.5% y-o-y in December from -1.5% in November, partly due to a high base last year. In CNY terms, we expect export growth to moderate to -0.4% from 4.1%. Import growth may have also slowed to -1.0% y-o-y from 4.7% in USD terms and to 7.9% from 10.8% in CNY terms. As a result, we expect the trade surplus to narrow slightly to USD42.0bn from USD44.2bn in November.”

“For money and credit data (10-15 January), we forecast modest drops in new RMB loans and aggregate financing in December to RMB700bn and RMB1.56trn, respectively. We expect a dip in M2 growth to 11.0% y-o- from 11.4% in November.”