00:00Mark Oswald is Chief Economist and Global Strategist at ADM Investor Services International.
00:06Great to talk to you again. Mark, always good to see you on Global Business Bureau.
00:10What's the most important signal coming out of this data?
00:16I think the two signals are this is an improvement as we head into the second half of the year,
00:23which is, you know, there's a pickup in optimism. Perhaps most notably, I think a lot of this was driven
00:30by the sharp fall in input prices down to 54.2 from 60.5
00:37and below its level that it was actually before the start of the conflict in the Middle East.
00:44And that's definitely giving everyone a little boost of confidence that, you know,
00:49given that they've shown resilience in the face of the energy price pressures and now those price pressures are coming
00:56off,
00:56they are actually seeing some reward, even if one would have to say the demand side is largely coming from
01:03the export sector rather than from domestically.
01:07So is that what's driving these numbers? Stronger domestic demand, firmer exports or businesses adapting to that tougher global environment?
01:19I think businesses are adapting to it. I think overall, the picture is not that even.
01:26If one looked at the steel sector, PMI, that's still languishing down at 47.8 and not really showing any
01:34signs of improvement.
01:35So this is very much being driven by the energy transition and related goods.
01:40The auto sector is seeing good demand from abroad, very strong demand from Europe above all,
01:46and indeed anything to do with semiconductors and AI data center related demand.
01:54So that's where you still see the real strength in the factory sector.
01:59What about the places where it looks more fragile?
02:05In traditional manufacturing, you know, it's a very patchy picture, and it has been for quite some time.
02:14I think anything which is related to infrastructure still sees quite strong demand.
02:20Anything which is related to residential property continues to see a lot of weakness.
02:28And I think most encouraging within the details of the PMI today was the pickup that we saw for medium
02:35-sized enterprises,
02:36which picked up from 48.6 to 50.5.
02:40That's quite a jump after languishing for quite a number of months.
02:45And it's that medium-sized enterprise sector which gives hope that there may be some broader strength in the second
02:54half of the year.
02:55Oh, you mentioned that broader strength.
02:57So how encouraging are these numbers for China's broader economic growth?
03:03I think it basically implies that we should be coming in somewhere in the sort of 4.5 to 4
03:10.7 for the second quarter.
03:11Then we might see a little bit of a pickup in the third quarter, given that boost from lower energy
03:18prices,
03:19given reports particularly for consumer goods demands out of the United States,
03:26where apparently there's quite a lot of front loading from retailers in the U.S.,
03:33largely in the face of fears of renewed forms of tariffs.
03:37So they're getting their orders in early, but that will definitely give China a boost, no doubt about that.
03:43Mark, great talking to you.
03:44Mark Wasford there.
