14 Mar 2016
China starts 2016 on a slow note - TDS
Annette Beacher, Chief Asia-Pac Macro Strategist at TDS, notes that the Chinese industrial production and retail sales sagged in Jan-Feb, disappointing market expectations and briefly weighing on the commodity currencies at the open.
Key Quotes
“Industrial production eased from 6.1% to 5.4% YTD (mkt 5.6%) while retail sales eased from 10.7% to 10.2% YTD (mkt 11%). Investment was more buoyant at 10.2% (mkt 9.3%) but was ignored.
We are not fans of this artificial Jan-Feb average, and prefer to wait for March data for clarity on real activity, however, using Q1 averages for RS and IP we see Q1 GDP easing from 6.8% to 6.7%. Bloomberg’s GDP proxy ended 2015 at 6.69%, eased to 6.32% in Jan and bounced to 6.8% in Feb. Again, taking the Q1 average, predicts that GDP eases from 6.7% in Q4 to 6.6% in Q1.
Over the weekend (before the data) as reported by BBG, PBoC Zhou said “Excessive monetary policy stimulus isn’t necessary to achieve the target,” reiterating past comments that monetary policy is prudent with a slight easing bias. “If there isn’t any big economic or financial turmoil, we’ll keep prudent monetary policy.”
While 2016 has started on a cautious note, it is consistent with the long-anticipated “China slowdown”. On balance, the economy is tracking at 6.5-7%, in line with the government’s target, and hence no trigger here for near-term stimulus. Our take on Zhou is that he would like to keep his powder dry, not disturbing the relative calm that markets have adopted in recent weeks.”
Key Quotes
“Industrial production eased from 6.1% to 5.4% YTD (mkt 5.6%) while retail sales eased from 10.7% to 10.2% YTD (mkt 11%). Investment was more buoyant at 10.2% (mkt 9.3%) but was ignored.
We are not fans of this artificial Jan-Feb average, and prefer to wait for March data for clarity on real activity, however, using Q1 averages for RS and IP we see Q1 GDP easing from 6.8% to 6.7%. Bloomberg’s GDP proxy ended 2015 at 6.69%, eased to 6.32% in Jan and bounced to 6.8% in Feb. Again, taking the Q1 average, predicts that GDP eases from 6.7% in Q4 to 6.6% in Q1.
Over the weekend (before the data) as reported by BBG, PBoC Zhou said “Excessive monetary policy stimulus isn’t necessary to achieve the target,” reiterating past comments that monetary policy is prudent with a slight easing bias. “If there isn’t any big economic or financial turmoil, we’ll keep prudent monetary policy.”
While 2016 has started on a cautious note, it is consistent with the long-anticipated “China slowdown”. On balance, the economy is tracking at 6.5-7%, in line with the government’s target, and hence no trigger here for near-term stimulus. Our take on Zhou is that he would like to keep his powder dry, not disturbing the relative calm that markets have adopted in recent weeks.”