Upbeat China Non-Manufacturing PMI does not reflect reality now - Bloomberg Economist

China's official Non Manufacturing purchasing managers index (PMI) rose to 54.1 in January from 53.5 in December, the National Bureau of Statistics said Friday.

The uptick, however, does not reflect reality now, according to Bloomberg’s economists Chang Shu and David Qu. 

Due to the New Year holiday, the survey was conducted earlier in January than normal – before the extent of the coronavirus outbreak and the disruption to the economy were evident.

Both Non-Manufacturing and Manufacturing sectors are likely to face the brunt of the virus outbreak over the coming months. 

The Manufacturing PMI dropped to 50 in January, matching the median estimate of economists. A reading above 50 indicates expansion, while abelow-50 reading represents consolidation. 

Key quote

The positive signal from China’s non-manufacturing PMI in January clearly doesn’t reflect the reality now - the economy will take a hit in the near term from the outbreak, and policy is likely to shift to intensive cyclical support for growth.