China Reports Catastrophic Data: PMIs Crash To Record Low, Confirming Coronavirus Collapse

One week ago, ahead of today’s Chinese data release which would for the first time capture the devastation from the coronavirus pandemic, we wrote that “to those who have been following our series of high-frequency, daily indicators of China’s economy, it will probably not come as a surprise that the world’s second biggest economy has ground to a halt, its GDP set to post the first negative print in modern history. To everyone else who is just now catching up, we have some news: it’s going to be bad.”

Specifically, we said that ahead of official Chinese economic data which will soon start capturing the period when the coronavirus crippled the country’s economy, Nomura’s Chief China economist Ting Lu pointed out that China’s Emerging Industries PMI (EPMI), which gauges momentum in the country’s high-tech industries and is closely correlated with official manufacturing PMI, slumped to 29.9 in February (from 50.1 in January!), its lowest-print on record, which was a “pure reflection of the devastating impact of the COVID-19 outbreak.

What would this mean for the closely followed China manufacturing PMI? As Nomura added, “even adjusting for seasonality and expected progress in business resumption in the coming week, we estimate the official manufacturing PMI could drop to a range of 30-40 in Feb.”

In retrospect, it turns out that Nomura’s dire forecast was optimistic, because moments ago China’s National Statistics Bureau reported the latest, February PMIs and they were absolutely catastrophic:

  • Manufacturing PMI crashed to 35.7 in Feb, far below the 45.0 consensus estimate, and sharply down from 50.0 in January. A record low.
  • Non-Manufacturing PMI plummets to 28.9, also far below the 50.5 consensus, estimate, and down nearly 50% from the 54.1 in Jan. This too was a record low.

Putting these numbers in context, they are far, far worse than the prints for both series reported during the financial crisis, when the mfg PMI dropped to “only” 38.8, while the non-manufacturing PMI never even contracted.

What is even more ominous is that while China’s non-mfg PMI has traditionally been stronger, in February not only did it collapse into deep contraction, but it plunged to 5 points below where the manufacturing sector currently finds itself, a catastrophic 20-handle. This means that China’s service industries, long seen as the guiding light to China’s successful transition away from a manufacturing-led economy, is now devastated.

Commenting on the unprecedented number, Bloomberg’s China economist Tom Orlik said that “the first credible gauge of how China’s economy is fairing under virus lock down – the official PMI – is pointing to a brutal drop into contraction.” Well, no: anyone who read our recent series analyzing “high-frequency”, real-time Chinese data already was already aware of the catastrophic collapse in China’s economy.

Of course, we are confident that as so often happens, the market will take these numbers in stride, as they will be an indication that China is “kitchen sinking” the collapse, and a V-shaped recovery will follow. Alas, it won’t because while not only has China’s economy not picked up even modestly, but it is only a matter of time before Beijing, which has forced people to go to work against their will, succumbs to a second wave of coronavirus infections, one which will result in a far worse economic collapse than the current one, which incidentally has yet to show any actual recovery!

Finally, for all those expecting that Beijing will unleash another massive stimulus to kick-start the economy at any cost, we give the last word to Nomura’s Ting Lu, who not only correctly predicted the plunge in PMIs, but also says that “the likelihood of another round of massive stimulus appears low as policy space remains limited.””

“We believe markets might underestimate the scale of the current growth slump. Due to a slower-than-expected rate of business resumption, we have cut our year-on-year Q1 real GDP growth forecast to 3.0% and expect Beijing to ramp up policy easing measures in coming months. That said, the likelihood of another round of massive stimulus appears low as policy space remains limited.

In short, for China – which was the world’s growth dynamo during the global financial crisis and helped the world rebound from the 2009 global depression while raking up tens of trillions in debt – the end of the economic road may finally be here.

via zerohedge


  1. As a number cruncher, these numbers really represent irrational fear. As the Coronavirus becomes better understood, it will be first isolated and then eliminated. DO NOT PANIC! But do prepare. Get educated and get the proper supplies and do your part in preventing the spread of Coronavirus. Trust POTUS Trump, he has the right people doing the right things.

    1. It’s not the Virus that concerns me, it’s the devastation of China’s economy affecting our economy. If businesses in America start shutting down, they won’t be coming back like some did n 2009 meaning that unemployment will soar.
      Not gonna be good if it keeps on.

  2. Don’t worry Meathead, businesses have been returning to the US from China even before Trump took office. After Trump took office the pace has accelerated and have continued to do so. Those businesses still will undoubtedly be coming home asap after this covid-19 (Corona virus) retreats. And it will! The markets were in a bubbles anyway and once all the hysteria is over and this virus fades away, the markets will return to some form of normalcy. It will again be above normal growth as businesses continue to return . China was on the verge of economic collapse even without the virus threat. The market always reacts to anything negative in the global arena. This will all pass as does any bad storm. The US economy will eventually become more dependent on itself as it should have been all along. The fear mongers and political deviants have exacerbated the markets turmoil not to mention Mike Bloomberg’s intentional hit piece in an ad toward the President and his administration as being ill prepared to confront the virus outbreak here in the US. His claim is the most despicable and ruthless attack without facts ever released by a Presidential candidate wannabe.
    We certainly don’t need a hatchet job like Mike who has spent a fortune only to take Trump down. He could care less about being the next US President. He has one goal and one only, destroy Donald Trump at all cost!

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