J.P. Morgan Update Post Yesterday's Weaker PMI Prints

J.P. Morgan sees downside risks to its near term China growth forecasts post yesterday's data.

• "Following the disappointing April data, we have revised down our 2Q GDP growth forecast to 3.5% q/q saar (following strong 1Q growth at 11.9% qq/ saar), with growth in the first two quarters averaging at a still solid 7.7% q/q saar pace. In this regard, the weaker-than-expected May NBS PMI readings, with the major drag from manufacturing sector softness, hint at moderate downside risk to our current quarter growth forecast."
• "Overall, restoring confidence among private entrepreneurs is a key factor to support a broader, sustained recovery going ahead, and the performance of private investment in the next several months will be key to gauge the risk bias to our growth forecasts (we expect private FAI growth to pick up to mid-single digit in 2H). "
• "On the policy front, while our baseline scenario does not expect meaningful supplementary fiscal stimulus measures going forward, if near-term macro activity data continues to disappoint, a range of moderate policy support measures may be brought forward, including the acceleration of special local government bond issuance, as well as product/industry specific policy support measures (e.g., home appliances/ NEVs for the rural households). On the monetary policy side, our baseline assumes another 25bp RRR cut in 3Q, which may be brought forward if needed."