Surprisingly high PMIs may secure China’s annual GDP growth at 6.2%: ANZ

December 2, 2019

HONG KONG - Both manufacturing and non-manufacturing PMIs in China jumped significantly in November, indicating a high possibility of China reaching 6.2% annual GDP growth in 2019. Manufacturing PMI returned to above the 50- threshold after contracting for six months. Non-manufacturing PMI also registered an eight-month high in November.

ANZ Bank say that if the trend continues in December, Q4 GDP may grow 1.4% q/q or 6.2% y/y, securing China's 2019 full-year GDP growth at 6.2%.

"However, the surging headline manufacturing PMI masks deflationary risks in the sector," the bank says.

"Holiday demand contributed to higher production (52.6 in November vs 50.8 in October) and new orders (51.3 in November vs 49.6 in October). But both input and output price indices continued to trend lower in November to 49.0 and 47.3, from 50.4 and 48.0 in October, respectively.

"This suggests deflationary risks in the manufacturing sector remain a concern, as we have recently highlighted."

The rebound in the non-manufacturing sector appears to be more meaningful, ANZ says.

"Boosted by holiday demand, manufacturing-related services sectors held up in November, according to the NBS. In addition, policy support for investment kept the construction sector upbeat.

"As a result, prices and employment sub-indices reported year-high readings.

"With the Government facilitating funding in infrastructure investment, we expect the non-manufacturing sector to extend this trend early next year, barring the Chinese New Year period." (ATI).