And there goes another ‘narrative’…
On the back of one better than expected soft survey PMI print, the world became convinced that as green shoots emerged, China was about to be reborn into magnificent credit-fuelled expansion and would save the world.
Tonight, that narrative died – everything missed expectations:
Retail sales rose just 7.2% (against +8.7% in March) – lowest since May 2003 (the 7.2% year-on-year rise in retail sales is actually weaker than all the estimates. The lowest was 7.5%, and the median was 8.6%)
Industrial Production growth slumped from a hope-filled +6.5% YTD YoY in March to 6.2%.
Fixed Asset Investment slowed to just 6.1% YoY.
Not green shoot-y!
Bloomberg’s Wes Goodman sums things up:
“The China data miss suggests the U.S. tariffs already in place are biting, putting the stocks gain Wednesday at risk. For now China shares are up strongly, even if gains have been pared, while the Aussie dollar is holding above earlier lows.”
Don’t worry though – there’s more stimulus to come everyone:
China’s NBS says it will implement counter-cyclical adjustments to maintain steady, healthy economic development.
Raymond Yeung of ANZ Bank makes the point that China needs to maintain growth above 6.3% or above.
“Today’s numbers are not supportive. We believe the State Council will launch more measures to shore up the market sentiment. More tax cuts and consumer subsidies are in the pipeline.”
Because all the stimulus so far has been working so well until now!
Blooomberg’s Enda Curran notes that numbers these bad will heighten scrutiny of the yuan’s moves. Will Beijing allow it to soften materially from here or will they keep a floor under it? It’s a double-edged sword for them.
The weaker the yuan, the greater the risk of financial market instability and the need for intervention. At the same time though, with exporters facing rising tariffs and slowing growth, the currency will remain center stage.
Does this move the trade deal pendulum back in Trump’s favor, forcing China to make a deal? We suspect that will be the bullish spin by the morning and why you should by any dip…
Finally there is this Orwellian nonsense – China’s economy is increasingly resilient to risks, the stats bureau spokeswoman says despite the weaker-than-expected data.