China: Strong Q1 but slowdown still expected - Danske Bank

Analysts from Danske Bank point out that data is showing a robust first quarter in China, but they warn about tentative signs of a peak.

Key Quotes: 

“PMI manufacturing in February rebounded from the decline in January but overall looks toppish. We expect PMI to decline gradually during 2017 as the boost from housing and infrastructure fades. The export sector serves as a buffer as it is supported by a weak CNY and robust US and European growth.”

“PMI for February rebounded but still in line with top in the cycle in Q1. Chinese leading indicators have pointed to a peak in the cycle for some time.”

“We look for a moderate slowdown during 2017 as the leading indicators support: 1. Slowing housing market 2. Fading boost from infrastructure”.

“Exports serve as a buffer as they are underpinned by (a) stronger global growth and (b) a weaker CNY. Main risk is a hit to exports in case of a trade war with the US. Monetary policy has been tightened moderately but we don’t expect a lot of tightening this year as the cycle fades and inflation is still low.”