China’s official purchasing managers index (PMI) and industry production growth could improve, new loans and total social financing will likely moderate in the month of May, according to forecasts made by BofA Merrill Lynch Global Research.
The bank expects the official manufacturing PMI could improve to 50.6 in May from 50.4 in April, as Beijing’s mini-stimulus program may have helped stabilize growth and boost business sentiment, especially for large enterprises.
This comes after flash HSBC PMI reading rebounded notably to 49.7 in May from the 48.1 final reading in April.
China’s industrial production growth could rebound to 8.9% year-on-year in May from 8.7% in April, because of the marginal improvement in high-frequency activity data in May.
For new loans, BofA Merrill expects it could fall to RMB650 billion from RMB775 billion in April. According to Chinese media reports, China’s "Big Four" state banks issued a total of RMB130 billion new loans from May 1 to May 25.
As the Big Four banks’ new loans could account for about 30% of the country’s new loans, it suggests that new loans in May could fall notably from April, even considering that new loan issuance will likely pick up pace in the final days of the month.
However, the Chinese central bank may have likely stepped up loan support to railway and social housing projects via re-lending to China Construction Bank and China Development Bank.
Meanwhile, the headline total social financing (TSF) could decline to RMB1,300 billion in May from RMB1,550 billion in April.
The year-on-year growth of outstanding loan and revised TSF could edge down to 13.6% and 16.4% respectively in May from 13.7% and 16.7% in April, while M2 growth could rise because of the People’s Bank of China’s re-lending activities.
The bank also predicts that consumer price index inflation could rebound to 2.4% year-on-year in May from 1.8% in April, mainly driven by the recent strong rise of pork prices, which rose by nearly 10% so far in May from the end of April.