Following more dismal data from the US, hope for global growth remains in China and they did not disappoint. Despite slumping macro data, a major slowdown in real estate, and the nation’s deleveraging efforts in the last three months, GDP beat, Retail Sales beat, Industrial Production surged, and even fixed asset investment was above expectations. The Yuan hasn’t moved.
For the last three months, Chinese data has been disappointing, along with US, as the collapsing credit impulse leaks into reality…
But exports and consumer spending have been pillars for the economy over the second quarter, offsetting the curb on leverage, and tonight’s data shows that none of that matters.. because the deleveraging economy beat across the board
- China GDP BEAT 6.9% (exp +6.8%, prior +6.9%)
- China Retail Sales BEAT 11.0% (exp +10.6%, prior +10.7%)
- China Fixed Asset Investment BEAT 8.6% (exp +8.5%, prior +8.6%)
- China Industrial Production BEAT 7.6% (exp +6.5%, prior +6.5%)
As the charts below show, more of the same well-managed data to show that all is well enough that hope remains…Strong growth again reflects an economy awash in credit, foretold in the latest new yuan loans (1.54 trillion yuan) and aggregate social financing (1.78 trillion yuan).
Enda Curran, Bloomberg’s Chief Asia Economics Correspondent, notes that at first glance there’s not a lot for the bears in these numbers given they appear strong across the board. The backdrop though continues to be one of cheap credit and mounting risks. That’s an issue policy makers say they are aware of but for now, it seems like growth above all else is key.
Iris Pang, greater China economist at ING Bank in Hong Kong:
“Higher than expected GDP growth comes from strong industrial production. That said, the gap between FAI growth and industrial production growth tells the story that it is consumption and export driven growth.”
Julian Evans-Pritchard, China economist at Capital Economics, said the strength seen in the data seems unlikely to last:
“The recent crackdown on financial risks has driven a slowdown in credit growth, which will weigh on the economy during the second half of this year.
“What’s more, the National Financial Work Conference that concluded over the weekend has signaled that further regulatory tightening remains on the horizon.”
We wonder how long before the lagged response to the credit impulse collapse hits GDP... (NOTE the weaker and weaker reactions in GDP to credit impulse surges)
The reaction in Yuan is underwhelming for now… (after its biggest weekly gain since March)
China’s stock market ripped back higher (after an early plunge) ahead of China’s data dump, and held those gains as the data hit (we wonder if someone got wind of the data a little early?).
As a reminder, Japan is closed for a holiday so we are not getting the usual juice from BoJ shenanigans on any move.