China non-manufacturing PMI surprises on the upside: Expect further rate hikes

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The CFLP non-manufacturing PMI for April surprised on the upside with 62.5, up from 60.2 in March. The number was in line with that of a year ago and right on target with the historical seasonal pattern.

Sources: CFLP; Plexus Asset Management.

It is clear to me that the stricter monetary policies of the PBoC had little effect on consumption patterns in China – the new orders PMI jumped to 58.3 in April from 55.5 in March. A buoyant export order book also underscored new orders – the new export orders PMI increased to 55.7 from 50.3.

My GDP-weighted PMI for April was virtually unchanged from last year’s level despite the disappointing manufacturing PMI that fell to 52.9 from 53.4 in March, principally as a result of the aftershock of Japan’s twin disasters.

Sources: CFLP; Plexus Asset Management.

In my view the PBoC has no other choice than to press ahead with further stricter monetary policies.

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