China April PMIs show trade war hit
China’s April manufacturing PMIs clearly hit by US-China trade war. Official non-manufacturing PMI and composite PMI also came down. Concrete signs of export shock make stepping up of support likely. Beijing still plays ‘hard to get’ versus US in terms of potential trade talks.
China Macro – April manufacturing PMIs clearly hit by trade war
This morning, China’s April PMIs were the first monthly macro data to show a clear hit from the escalation of the US-China trade war in the course of this month. On the manufacturing side, the official PMI published by NBS came down more than expected, falling back into contraction territory. This index dropped by 1.5 points to a two-year low of 49.0 (March: 50.5, consensus: 49.7). While the weakening was broad-based, particularly striking – and symbolic for the impact of the trade war – was the sharp decline of the export component, which fell by more than four points to a post-pandemic low of 44.7. Meanwhile, Caixin’s manufacturing PMI (which has a stronger coverage of export-oriented firms) also fell, but less than expected, remaining just above the neutral 50 mark at 50.4 (March: 51.2, consensus: 49.7). Also in this survey, the export component was the negative outlier: it fell by around 4.5 points to a post-pandemic low of 47.5. The employment components in both surveys also weakened, with Caixin’s sub-index now being back in contraction territory alongside the official one.
Official non-manufacturing PMI and composite PMI also came down
Meanwhile, the official non-manufacturing PMI – covering services and construction sectors – also came down, but relatively modest, to a level of 50.4 (March: 50.8, consensus: 50.6). The services sub-index slipped back to 50.1 (March: 50.3), while the construction sub-index fell more sharply, to a three-month low of 51.9 (March: 53.4). The official composite PMI (a weighted average of the output components for manufacturing and non-manufacturing) fell to a three-month low of 50.2 (March: 51.4), remaining just above the neutral mark. Caixin’s services and composite PMIs for April will be published on the 6th of May.
Signs of export shock make stepping up of support likely; China still playing ‘hard to get’
All in all, the drop in China’s April PMIs are clear signs of the export shock related to the escalated trade war, although we still expect exemptions, trade circumvention/diversification and the further stepping up of monetary and fiscal support to cushion the blow to some extent. All of this is also in line with our recent downgrade of China’s growth forecasts, to 4.1% (from 4.3%) for 2025 and 3.9% (from 4.2%) to 2026. We also note that the US is still trying to get China to the negotiation table, adding that China should take the initiative, but China is still playing ‘hard to get’ right now for several reasons – see for more background our monthly update published last week,