PMI points to robust recovery of industrial production and economic activity in 4Q20PMI points to robust recovery of industrial production and economic activity in 4Q20
Our observations
• The recovery of small enterprises continues to lag behind that of large and medium enterprises.
• Output 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 remains steady.
Policy outlook
• China will maintain ‘necessary’ policy support for the economy and avoid sudden policy shifts.
• The proactive fiscal policy will be implemented in a manner that is of higher quality, more effective and more sustainable, and the intensity of expenditure will be maintained. Meanwhile, the prudent monetary policy will be pursued in a more flexible, tailored and appropriate way, with steps to ensure a stable macro leverage ratio.
• These policies will help alleviate the downward pressure on the Chinese economy and promote its continued recovery.
Our forecasts for 1Q21
• We project a further expansion of industrial production and economic activity in 1Q21.
• The headline PMI will stay above 50 and fluctuate within 51.0 to 52.0.
• Real GDP growth will top 18.0% yoy.
• VAIO growth will exceed 22.0% yoy.
• Exports will increase by 30.0% yoy.
• Year-on-year growth rates for both the purchaser price index and the PPI will rise further.