Chinese economy firm growth, low inflation
Chinese activity and trade data were close to market expectations in May but inflation data printed below economist forecasts.
What do the figures show?
- Retail trade rose at a 12.9 per cent annual rate in May, in line with forecasts and up on the 12.8 per cent annual rate in April; Industrial production rose at a 9.2 per cent annual rate in May, a touch below the forecast average (9.3 per cent) and down on the 9.3 per cent annual rate in April; Urban investment rose at a 20.4 per cent annual rate in the first five months of 2013, below the forecast average (20.5 per cent) and down from 20.6 per cent in March; Trade surplus $20.4 billion in May (expectation $19.3 billion; $18.16 billion in April).
- Chinese consumer prices fell 0.6 per cent in May to be up 2.1 per cent on a year ago (forecast 2.5 per cent annual; April, 2.4 per cent annual); producer prices fell 2.9 per cent in the year to May (forecast -2.5 per cent; April, -2.6 per cent).
Why is the data important?
- China’s National Bureau of Statistics releases its monthly economic statistics around mid-month. Quarterly GDP data is released around the 16th of January, April, July and October. China’s Customs Office releases trade data, and the People’s Bank of China releases financial statistics, around the 10th of each month. China is Australia’s largest trading partner and changes in the Chinese economic have major implications for the Aussie economy.
What are the implications?
- It would be difficult to concoct a more benign set of figures. Activity data such as retail sales, production and investment broadly printed in line with economist expectations; the trade accounts remain in healthy surplus; and inflation data printed below forecasts. Simply, with inflation well contained, policymakers have maximum elbow room. More stimuli could be provided if needed in the future, but at present the economy is faring OK.
- In addition, money supply growth, new lending and outstanding loan growth printed softer than expectations and fell short of the April results, reducing fears about excessive credit growth and future problems for the banking system.
- The latest data may seem dull, but it is just the mix of benign results that investors crave given current the uncertainty about future monetary policy decisions in the US.
- Aussie investors want solid but sustainable growth in China. Perhaps they would be happier with slightly stronger growth, but that could raise issues about sustainability. Still, inflation-adjusted retail trade grew at the fastest pace in five months in May.