China: PMI’s sharp drop to delay economic normalisation – ANZ

The sharp drop in China’s manufacturing PMI in February reinforces the view of analysts at ANZ Research that the normalisation in economic activity will be delayed, as reflected in high-frequency growth trackers.

Key quotes

“There has been a huge contraction in both demand and supply, as reflected in the steep declines of sub-30 seen in sub-indices such as production, new orders, and new export orders to 27.8, 29.3 and 28.7, respectively.”   

“We see the economy contracting by 2% in Q1 on a sequential basis and revise down our forecast of Q1 GDP to +2% y/y (previously 3.2−4.0%).” 

“Chances of a v-shaped rebound are low. We cut our forecast for 2020 to 4.1%. The government has targeted aid to affected sectors and enterprises, rather than using stimulus.”