Chinese Manufacturing Remains In Contraction For 4th Consecutive Month
Jeremy Cook | Apr 23, 2014 05:40AM ET
After a day so dull that it verged on the Sisyphean yesterday, we have finally had some overnight movement to get interested in. Chinese preliminary PMI readings for April from the manufacturing sector rose from 48.0 to 48.3 – remaining in contractionary territory. This is the fourth month in a row that this number has been below 50.0, a symbol of deteriorating growth, which increases the chances of additional stimulus from the Chinese authorities in the coming months.
Last week saw the publication of China’s GDP results for Q1 of this year, with output dipping to its slowest level of growth in six consecutive quarters. The economy grew on a year-on-year basis by 7.4%, slightly higher than the consensus estimate of 7.3% – a figure that would have been the lowest growth level since 2010. The 7.4% figure is not a disaster in itself but is a perpetuation of a recent trend of disappointment that sometimes masquerades as impending disaster. A natural slowing of the Chinese economy has been occurring through the past 18 months as Premier Li attempts to re-engineer growth from the characteristics of an emerging market power to one of a developed nation.
The yuan has slipped to a 16 month low after the figure as the PBOC continues to guide it lower. Advance readings of services and manufacturing sector PMIs are also due from France and Germany this morning. One of these countries will be looking to see whether March’s vastly improved growth numbers can be continued while the other will be hoping that a near-term slip is nothing more than a month-long wobble. It is France however, that is the more positive at the moment with German industry nerves – as shown in last week’s ZEW survey – increasing due to the Ukrainian situation and the prospects of deflation within the Eurozone.
Australian dollar has been on a tear this year – up 4.7% against the USD and 3.2% against GBP – but some of the wind was taken out of its sails last night following a disappointing inflation measure. CPI in Australia rose by less than had been expected in Q1, hitting a level of 2.9% vs an expected 3.2%.
Core prices were also lacklustre and have trimmed expectations of any near term rate rise by the Reserve Bank of Australia. Swaps data has seen traders bring in thoughts of just how much interest rates will increase; before, the data markets were looking for 19bps of rate increases this year, this has now slipped to 15bps. Thoughts of rate cuts by the RBA also linger and while Australian data has been very strong through their summer, attention to the downside must also be paid.
The minutes of this month’s shortened Bank of England meeting are due this morning. We expect policy to remain on hold for another 12 months from now but that does not mean that dissenting voices on a number of issues will not come to the fore earlier. The recent dip in inflation to a 4yr low as part of a landscape of rising sterling is cause for comment and I would not be surprised if the MPC issued comment that further gains will be closely watched to prevent further additional slips in the rate of price rises.
Get The News You Want
These minutes will also provide the back bone of the next Quarterly Inflation Report, due mid-May, and we will be looking for signs of forecast re-appraisal on both growth and inflation measures.
The advance reading of US manufacturing PMI is the highlight of a quiet US session and once again we expect rates to remain especially sideways this session.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.