Economists hoping to dress up their analysis of April data have two choices.
Fourteenth-century English poet Geoffrey Chaucer’s “April with its showers sweet” is the go-to choice for any green shoots.
Twentieth-century American malcontent T.S. Eliot’s “April is the cruelest month” is available if the data disappoint.
Based on the early indications, China this April is going to be all Chaucer:
– Metal prices extended their gains, with steel prices now at their highest level since the second half of 2014.
– World Economics’ sales managers’ index edged up to 51.3 from 51.2 in March, pointing to a slight acceleration in the improvement in conditions.
– Market News International’s business survey result rose to 50.5 from 49.9 in March — a swing from marginal deterioration to slight improvement in conditions.
– The Satellite Manufacturing Index and Minxin PMI stayed below the 50 mark but still showed conditions deteriorating at a less rapid pace than in past months.
– The Premise index of prices of consumer staples stayed strong, pointing to resilient consumer demand.
It’s worth noting that the ratio of noise to signal in early indicators is high.
The indexes are variously volatile (MNI), have a short history (World Economics, Minxin and Premise) and sometimes deviate substantially from more established benchmarks (Minxin).
It’s also true that the indexes are pointing to a marginal improvement from a low starting point, not a return to booming growth.
Caveats aside, across-the-board improvement in the early indicators is a positive sign, suggesting that the reacceleration seen in March was more than just a seasonal blip.
There are already hints that the People’s Bank of China is recalibrating its policy stance, focusing less on stimulus and more on controlling financial risks.
Markets are trimming bets on further rate cuts.
If early signs on April growth are borne out, they might be right.
The views expressed in the article are of Tom Orlik, an economist at Bloomberg Intelligence.
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