China: PMI measures slowed to start Q2 - BBH

The research team at BBH notes that China reported its official PMI measures over the weekend and both the manufacturing and non-manufacturing measures slowed to start Q2 after accelerating in Q1.  

Key Quotes

“At 51.2, the manufacturing PMI was softer than expected and below both Q4 16 and Q1 17 averages, but above the 50.3 average for all of 2016.  Output, new orders and export orders slower. Price measures fell, likely reflecting the drop in industrial metals.”

“A similar pattern was evident in the non-manufacturing survey.  The 54.0 reading is lower than the Q4 16 (54.4) and Q1 17 (54.6) averages, but above the 2016 average (53.7).  The April reading is the lowest since last October.  Construction remains strong, while services moderated.  The May Day holiday may help minimize the impact of the Chinese data, while capital controls deter outflows, and foreign inflows also seem minimal.  Chinese shares that trade in Hong Kong (H-shares) have performed markedly better than the mainland shares (A-shares).  MSCI has floated a scaled back proposal to include A-shares in its indices, and has received support for the first time from one of the largest US-based asset managers.”

“Chinese policymakers appear to be moving from one horn of a dilemma to the other.  During periods of relatively strong economic growth, which is still seemingly tied to credit expansion, anxiety over the debt burden eases.  As officials take measures to address the debt burden or to check its growth, the economy eases and increases the fear.”