As a sign that massive injections of incentive measures into China work as the country opens, tonight PMI has risen since May and exceeded expectations.
However, as Bloomberg reports, while part of the economy has recovered from viral stops, there is an obvious discrepancy between supply and demand – factories and companies have returned, and production is growing again, but export and retail sales in the domestic market are declining (and employment in industry fell to 49.1).
“Despite the high level of resumption of work, demand recovery is slow, which affects the pace of improvement in industrial production”, Lu Zhengwei, chief economist at Industrial Bank Co in Shanghai, wrote in a report this week.
In addition, a separate PMI indicator that measures China’s high-tech industries has slowed significantly this month. The index of purchasing managers in developing industries fell to 51.4 this month from 55.9 in May. According to the bank, with reference to a research firm associated with the Federation of Logistics and Procurement, which collected the data.
“The sub-index of new export orders remained low at 32.6 in June, unchanged from May to April, offering a steady headwind from overseas markets ” Nomura economists led by Lou Ting wrote in a report.
The increase in coronavirus-related drug exports is largely due to price increases, which are probably “volatile,” they write.
“We expect a bumpy recovery path filled with uncertainty, as China finds itself between a domestic policy incentive, continuing rules of social distance and a decline in external demand,” the report said.
One possible disadvantage is that severe floods in southern China may also have slowed production in some areas, and a recent outbreak of coronavirus has also struck confidence.