China Growth Tracker: Reopening Index Suggests PMIs Will Fall Further in May

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 continues to suggest weakening activity ahead. Our market data-based China growth tracker followed suit.
• In contrast, our economic data-based China growth tracker continues to produce a positive outlook on the economy with April electricity and PMIs (largely) leading the index higher.

Depressing China Data Developments

Our reopening index continues to slide lower, suggesting the May PMI readings will further weaken from the moderation seen in April (Chart 1). Weaker broad economic developments alongside weaker port and box office activity outweighed increased domestic travel (Chart 2).

Similarly, market-based measures have continued to worsen, led by a sharp worsening in the yearly change of the Baltic Dry Index (Chart 3 and Table 1). The gains in iron ore, oil, and China 10Y yields were more moderate.

However, this sits in stark contrast with our economic data-based China growth tracker (Chart 4 and Table 2). April electricity and PMI details proved  positive for China’s outlook.

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.

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