PMI points to robust growth in manufacturing production and economic activity in 1Q21
Our observations
• Expansion of large enterprises accelerates while medium and small enterprises return to expansion.
• Manufacturing production expands at a relatively rapid pace as overall demand picks up fast.
• New export orders increase amid a sustained recovery in external demand.
• Prices of production inputs surge, adding cost pressures on Chinese manufacturers.
• Manufacturers raise ex-factory prices of their products amid increasing cost pressures and improving sales environment.
• Manufacturing employment increases alongside a strong recovery in the export sector and overall economy.
Policy outlook
• The Chinese government will maintain necessary policy support for the economy.
• The proactive fiscal policy will be implemented in a manner that is of higher quality, more effective and more sustainable. Meanwhile, the prudent monetary policy will be pursued in a more flexible, tailored and appropriate way, with steps to ensure ‘reasonably sufficient’ liquidity and a stable macro leverage ratio.
• These policies will help promote the continued recovery of the Chinese economy.
Our forecasts for 2Q21
• We project a further expansion of manufacturing production and economic activity in 2Q21.
• The headline PMI will stay above 50 and fluctuate within 51.0 to 52.0.
• Real GDP growth will reach 8.0% yoy.
• VAIO growth will top 8.5% yoy.
• Exports will jump by over 15.0% yoy.
• Year-on-year growth rates for both the purchaser price index and the PPI will rise further and reach their near-term peaks.