China's flash PMI (released on Thursday) remains subdued, with the index falling to 49.2 in April from 49.6. The decline suggests that seasonal distortions, which should have faded in April, may not have been the only factor behind the weakness in activity data last month and that underlying momentum has softened slightly.
"We are not greatly concerned by Thursday's reading. When compared with an average of 50.0 for both Q1 and also Q4, it doesn't appear substantially weaker than over the past six months." notes Capital Economics
Meanwhile, policymakers have begun to adopt a more accommodative stance than a year ago, when the index was lower. Sunday's cut to the required reserve ratio came too late to impact Thursday's reading but should help support activity over the coming months.
"We expect policymakers to roll out more measures to ensure that growth doesn't slip much further." Capital Economics
