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The May PMIs are backward-looking; clearly the bigger story right now is the easing of covid lockdowns. But today's surveys are still useful, suggesting there are some important headwinds to how fast a recovery there can be from here.
The first end-of-month sentiment survey for May was even weaker than in April. That suggests the economy is still contracting. Against that, it was mildly encouraging that prices also weakened, inventories seem to be low, and financing availability didn't deteriorate too much.
Covid numbers finally show real signs of turning, clearing the way for a cyclical recovery in June. But the policy response doesn't yet feel strong enough to add much to the upside.
Reading the western media, and it seems the strongest market in China right now is for doom and gloom. Which is striking, as the short-term cycle is likely close to a trough, while there are reasons to think the longer-term outlook isn't as bad as the spate of the-end-is-nigh headlines suggests.
The Covid-19 situation has improved, but not by enough to declare the all-clear. Policy has eased, but not by enough to ensure recovery when lockdowns do end. There's more debate about giving help to households, but further loosening still seems likely to focus on companies and investment.
The 5-year Loan Prime Rate was cut 15pb today. That was bigger than market expectations, but property equities rose only modestly. That is likely a reflection of how weak activity currently is, and thus how much work still needs to be done to turn things around.
As was seen with other indicators for the property market in April, the tentative recovery in housing prices of the last few months also lost momentum last month.
Economic activity came to a halt in April, and given the government's priorities, can't restart until lockdowns end. The PBC has offered more policy support, but given the hole the economy is in, not enough yet.
Chinese GDP is almost certainly contracting once again. The quality of the data makes it difficult to say how deep the fall is, but by my rough estimate, RGDP declined by perhaps 2-3% YoY in April.
The credit data were weak in April. That's certainly in part due to the covid lockdowns, but it doesn't feel like there is enough policy support yet to ensure recovery if and when the virus situation improves.
Food price inflation rose in April, pushing up overall CPI. But core remains subdued, and PPI inflation fell back.
Probably, the all-out approach to beating covid is the government merely repeating the 2020 Wuhan play book rather than giving up on growth. But there are other explanations, and it isn't yet clear where growth will come from this year.
Exports declined 6% MoM in April, the biggest fall in any normal month since April 2019. As they did then, the lockdowns probably explain some of the decline, and the leads, while clearly pointing down, don't point to the rate of decline in April being sustained. Still, this is an important data point. Across the region, there's growing indicators of a real export slowdown that will
For Li Keqiang and his mission impossible to get to 5.5% growth this year, the only silver lining in the very weak April Caixin PMI was that respondents were somewhat positive about the medium-term.
Policy rhetoric is becoming easier, and FCI is easing. But there are two big headwinds to any of this having an impact: investor scepticism, and covid.
The government's view that it is homebuilders not homebuyers who are the "speculators" has big implications for where the property cycle goes next, and what that means for the economy.
It wasn't a surprise that the official PMIs fell sharply in April, but the charts are nonetheless quite dramatic.
The Politburo has gone a step further in supporting the economy, including real estate.
The government, fearing inflation or perhaps CNY weakness, is stepping up easing, but trying rather furtively.
The government's plan right now is to get the virus under control, and then guide companies back to work, thereby lifting the economy out of the covid shock without having to commit to a whole load of new 'stimulus'.
The National Bureau of Statistics reported today that the economy continued to recover in Q1, and overall was "stable". That's quite the positive spin.
Somewhat strangely, Chinese property prices in March continued to show signs of bottoming out.
YoY export growth is clearly slowing, and while the (somewhat patchy) leading indicators available for Chinese export growth suggest this weakening continues, the downside looks somewhat limited for now.