China: Manufacturing PMI likely to edge higher in May - TDS

Analysts at TD Securities suggest that after dipping back into contraction territory in April, the Chinese manufacturing PMI is likely to edge higher in May though it may be a stretch to expect a move back above 50.

Key Quotes

“We expect the PMI to rise to 49.8 in June from 49.4 previously, supported by hopes of progress on US-China trade talks at the G20 meeting, while any improvement will be dampened by the economic damage from current tariffs and slowing activity.”

“Improved liquidity will have helped sentiment. Manufacturing sentiment has become more correlated with equity market performance and the 5% rise in Chinese equities this month (CSI) also points to a higher PMI.”

“We expect a slight decline in the Caixin manufacturing PMI to 50.1 in June from 50.2 in May. Manufacturing sentiment among smaller and medium sized companies covered by this survey remains a little more upbeat than the official PMI. These companies have been helped by more targeted stimulus. However, these companies are most impacted by a weaker exports outlook and this has worsened. Hopes of progress in US/China trade talks in the run up to the G20 will likely have given some support to sentiment.”