China’s Rebounding Economy Is Likely Exception, Not Norm

Manufacturing indexes in China show that the country’s post-pandemic economy is on the rebound, the latest reports indicate. 

China’s official manufacturing purchasing managers index (PMI) and the Caixin China PMI, both showed that factory productivity was on the upswing in May. China’s official manufacturing PMI for May came in at 50.6 and the Caixin was 50.7. Numbers larger than 50 is a sign of expansion.

“May data signaled a further increase in output following February’s record decline, with firms widely mentioning the resumption of works due to an easing of COVID-19 related measures,” said Caixin and IHS Markit said in a joint statement.

IMA Asia analyst Richard Martin told CNBC that China’s strong recovery might be the exception and other global economies may not experience the same growth. 

“That’s a V-shaped recovery you see in the [PMI], down sharply in February, back up in March, still strong in April, back up a little above 50 in May,” said Martin.

Martin added that Vietnam and Taiwan could follow in China’s recovery direction, but it’s normal for there to be a mix of ups and downs, with some economies dropping and staying down “for two or three months before they come back up.”

“That will be the story we see in Europe and the United States, and people still haven’t adjusted to that,” Martin said. “They think once COVID-19 dies down, that’s the end of the game. But it’s not.”

Consumer spending data released last week by the U.S. Department of Commerce indicated that people aren’t spending, despite the temporary income boost. Personal income was up by 10.5 percent in April — however, consumption was down by 13.6 percent. Reports show that economists anticipate the GDP will drop by 40 percent or more in the current (second) quarter.

Spending on durable goods like major appliances was off by 17.3 percent. Non-durable spending was down 16.2 percent for merchandise like clothing and 12.2 for services like doctor’s visits.