The new orders component of the Chinese official manufacturing purchasing managers’ survey edged higher in May, and by more when account is taken of residual seasonality in the published series. This is consistent with a recent improvement in equity analysts’ earnings revisions noted in a previous post and suggests a near-term recovery in industrial output growth – see first chart.
The input prices component of the survey, meanwhile, rose to its highest level since July 2014, signalling a slowdown in producer price deflation – second chart.
Narrow money trends have been predicting a modest economic growth revival: the average level of six-month expansion of real “true” M1* so far this year has been higher than in the second half of 2014, although monthly data have been volatile and the latest reading was still subdued – third chart and previous post. Real M1 needs to strengthen significantly further to suggest that recent policy stimulus has been sufficient to return economic growth to target. (May money numbers are expected to be released over 10-15 June.)
*True M1 includes household demand deposits, which are excluded from the official measure.
