China Growth Tracker: Potential for Stronger-than-Forecasted July PMIs

We published a note on how to track Chinese growth in real time using financial and commodity market prices. In these weekly reports, we update the indicators to help us track growth.

Summary

• Our high-frequency China reopening index has improved sharply over the past two weeks, in line with Singapore crack spreads.
• This suggests there is potential for an upside surprise in the July PMI.
• Our China growth tracker based on market data continues to improve, though our economic data-based tracker saw a strong weakening through June.

Market Tracker Appears Optimistic Versus Actual Outturns

Having proven volatile over the past month, our high-frequency China reopening index has improved over the past week owing to better port, travel and box office data (Charts 1 and 2). Combine this with the recent spur in Singapore crack spreads, indicating stronger Chinese industrial demand (Viresh explains what this all means in his latest Commodities Weekly), and there is a strong chance for PMIs to turn out better than markets currently expect (Chart A).

Our market data-based China growth tracker has also seen a positive move recently (Chart 3 and Table 1). In contrast, however, our economic data-based China growth tracker has continued to worsen as the final June reading dropped 37 points over the month on the back of weaker rail volumes (Chart 4 and Table 2).

Bilal Hafeez is the CEO and Editor of Macro Hive. He spent over twenty years doing research at big banks – JPMorgan, Deutsche Bank, and Nomura, where he had various “Global Head” roles and did FX, rates and cross-markets research.

Ben Ford is Researcher at Macro Hive. Ben studied BSc Financial Mathematics at Cardiff University and MSc Finance at Cass Business School, his dissertations were on the tails of GARCH volatility models, and foreign exchange investment strategies during crises, respectively.

Photo Credit: depositphotos.com

(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)