Chinese recovery, normalization of supply chains

The February PMIs for China, released tonight, suggest that the Asian economy has started the year strong. There is a significant increase in production. The official manufacturing PMI rose to 52,6 points. thereby beating market expectations. This is also the highest result since 2012. The good data reflects the resumption of activity after January's Chinese New Year holiday and the effects of reopening the economy after the pandemic. You can see the normalization of supply chains.

Economic recovery in China

The hard data began to show economic recovery in China. As expected, domestic demand is strengthening. New export orders also rose above the neutral level of 50 points. This reflects the return of customers after the end of the lockdown. The improvement in the industry is also confirmed by the S&P Global/Caixin index, which increased to 51,6 points. from 49,2pts.

As for services, they remain stable after strong growth in January. The result of 56,3 points indicates the strength of the sector and the revival in household consumption after January's holiday spending boom.

The economy of the Middle Kingdom should rebound as it restarts the departure from the restrictive "zero-covid" policy is conducive to demand and allows for the normalization of supply chains. However, the strength of the recovery will depend on employment and income prospects. In the case of the real estate market, it takes time to reverse the downward trend. At all times, let us remember that the risk factors related to the global slowdown and US-China tensions remain strong.

Improvement of sentiment in Poland

This morning we also got to know the PMI for Polish industry. There is an improvement in sentiment, but the rebound of the indicator is small (48,5 points) and still remains below the limit of 50 points. There is a decrease in price and cost pressure, which is a positive phenomenon. Since the early hours of the morning, we have been observing an increased demand for the Polish currency. The zloty is gaining against the dollar and the euro.

The USD/PLN pair drops below 4,41 and EUR/PLN, it already shows 4,6930 and is the lowest since February 5. The appreciation of PLN is certainly partly the result of increases in the EUR/USD exchange rate, which broke above 1,0650 this morning. Appetite for risk can also be seen on the Polish stock market. Wig20 opened with an upward gap today and gained over 0,5 percent.

Source: Łukasz Zembik, OANDA TMS Brokers