After some economists shrugged off a series of weak China data in recent months, some are also shrugging off today’s strong China data.
Always the first to comment on HSBC’s China PMI is the bank’s own chief China economist Hongbin Qu. While Qu admits that “the improvement was broad-based, with both new orders and new export orders back in expansionary territory,” he’s also troubled by the softer employment subindex, “which implies that this month’s uptick in sentiment has not yet filtered through to the labor market.”
Taking it all into account, Qu renews his call for looser policy from China’s central bank: “Downside risks to growth remain, particularly as the property market continues to cool. We think more policy easing is needed to put a floor under growth in the coming months.”
After tipping a drop in the HSBC flash PMI, meanwhile, TD Securities is cheering the surprise results but is also unconvinced that the economy is out of the woods just yet.
“Today’s data appears to show improvement to be broad-based … However, it is still too early to say whether this index is showing the first signs of breaking its relationship to the iron-ore price,” writes TD Securities strategist Prashant Newnaha, referring to the bank’s observation that the PMI and iron ore have moved in a tightly correlated pattern over the past couple years. (See earlier post on today’s blog.)
PNC senior international economist Bill Adams is also cautious about the signs of a turnaround, saying the data has picked up “to ‘meh’ in May from ‘blech’ in April.”
“The Asian manufacturing business cycle could be stabilizing a bit in May after a tough April, but the improvement is modest,” Adams writes, referring to both the China PMI and similar data out of Japan.
And finally, AMP Capital’s chief economist Shane Oliver takes to Twitter to highlight both the upside and downside in the data: