The latest manufacturing PMI reading reflects a modest rebound in sector growth, mainly coming from improvements in internal and export demand. Most of the sub-indices point to faster growth, but we consider January’s acceleration to be fragile and do not see enough ground for growth to aggressively recover in the coming quarters. Instead, we think than 1H13 will see economic growth bottoming out and then, closer to the year-end, the economy will likely turn around following monetary easing and public infrastructure spending.
On a positive note, growth in input and output prices continued to follow a downward path, supporting our view that the underlying inflation trend has become disinflationary. We suggest that after a one-off pick-up in headline CPI in January- February, we will see a downward trend in headline CPI.