China: PMI lower on exports – Broadly as expected

• Chinese PMI manufacturing dropped as expected in April as export orders declined sharply. Total orders are not looking as bad, though, a signal that stimulus is underpinning the domestic economy, at least for now. The numbers are not a big surprise as we've already seen container traffic between US and China decline sharply. The flip side is also that imports into the US is falling sharply, causing concerns over empty shelves over the summer.

• The data suggests policy makers will continue to front load stimulus and stand ready to turn up the notch if we see much further weakness. Whether they will already announce new measures now is uncertain but it won't take much more weakness before we get there. Also depends on what happens on trade talk front.

• Below some details:
  o The official NBS manufacturing PMI dropped more than expected from 50.5 to 49.0 (consensus 49.7).
  o The private version from Caixin was better than expected but still showed a drop in manufacturing PMI from 50.8 to 50.4 (consensus 49.7) o Export orders dropped sharply in both versions, NBS from 49.0 to 44.7, Caixin from 52.0 to 47.5.
  o The total new orders index dropped less, NBS 51.8 to 49.2, Caixin 52.1 to 50.5. This is soft but not a disaster and suggests domestic orders is holding up so far.
  o The PMI manufacturing price components were mixed. NBS showed a drop from 47.9 to 44.8 in output price index while the Caixin version showed a broadly flat reading (49.2 versus 49.1 in March)
  o NBS also released non-manufacturing PMI that includes services and construction. The index dropped moderately from 50.8 to 50.4 (consensus 50.6), The new orders index, however, dropped more from 46.6 to 44.9 suggesting challenging months ahead. Interestingly the employment index from 46.5 to 46.8. The construction PMI orders index showed a concerning decline from 43.5 to 39.6 highlighting that the construction sector is still in deep recession. It contrasts a bit with hard data recently which have shown some signs of stabilisation in housing starts.
  o The NBS composite employment index increased moderately from 47.0 to 47.1. Still too soft to drive real consumption recovery but stimulus is helping for now and has pushed up retail sales to 5.9% y/y in March

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