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03 May 2010
Specialty Chemicals (Chemicals) / MARKET WEIGHT
April China PMI Data: The Rubber Band
Tightens in Chemicals
The China PMI April data showed solid growth, rising 0.6 p.p. sequentially
to 55.7. For the most part, the components driving the numbers were also
positive as the new order index (which is more forward looking), increased 1.2
p.p. to 59.3 (driven by across-the-board improvements), and the output index
increased 0.7 p.p. to 59.1. The new export orders index stayed flat at 54.5,
while the import index moderated to 53.1 (from 53.7 in March), suggesting the
trade balance may return to surplus soon.
Our CS Economist for non-Japan Asia, Dong Tao, believes the set of data
indicates that China’s economic momentum remains on track, despite the
turbulence in the property sector. However, the team is concerned with the 7.5
p.p. jump in PMI input prices (to 72.6), and believes that it reflects a strong
return of inflationary pressure and the potential tightening of monetary policy.
The Chemical and Chemical Fibers segments indicated some interesting
trends beyond the actual PMI number – with Chemicals coming in relatively
flat at 52.4 and Chemical Fibers improving 3 p.p. to 55.8. In the details, we
believer there is a trend that is building that may point to an eventual “snapping
of the rubber band” as the