CNY: Some early weak points – Commerzbank

Official purchasing managers indices for the Chinese economy were published this morning, revealing the first signs of the impact of the US prohibitive tariffs 0.4 points, says Volkmar Bour, Commerzbank’s currency analyst.

The CNY will weaken in the coming months

“However, some of the details were more surprising than the main figures. For example, export orders in the manufacturing sector fell 4.3 points to 44.7, the lowest level since the end of the confinements of 2022. Consequently, the new requests fell below 50 in general, which does not predict anything good for the coming months. In addition, the subscripts for prices developments in the sector Manufacturer fell around 3 points each in April, indicating a significant decrease in producers’ prices.

“The IPP, which has been in negative territory since October 2022 and stood more recently at -2.5% year -on -year, it is therefore likely to continue falling into a negative territory. In the construction sector, both subscripts for new orders and employment fell significantly, the latter being 37.8, its lowest level apart from the initial shock by the crown in January 2020. These figures suggest of the real estate market is far from having finished and will continue to impact the economy, along with additional risks in foreign trade.

“The employment components in the manufacturing and services sectors remained practically unchanged. This suggests that the domestic economy may be able to resist external shock at least to a certain extent. In general, the PMIs point to a weaker economy and a very low continuous inflation. This would normally give the Central Bank margin to loosen even more monetary policy. Despite the slight strengthening of the CNY in recent days. Therefore, I’m still waiting for it to weaken in the coming months.