Chinese economic data beats expectations

What does it all mean?

• The latest Chinese economic data is encouraging. Figures largely beat expectations, especially money and lending indicators. Growth rates are settling at lower levels than a few years ago but that was always going to happen in a bigger, more developed economy.
• The second largest economy in the world is producing annual growth rates near 12 per cent for retail sales, 9 per cent for production and 17 per cent for investment. Whichever way you cut it, these are solid growth rates, even though they have eased in recent years.
• Observers in other parts of the world should take the view that the Chinese economy continues to expand at a healthy pace and that the outlook remains positive.

 What does the data show?

Chinese economic data

• Retail sales rose at a 12.5 per cent annual rate in May, above forecasts (12.1 per cent) and up from the 11.9 per cent annual rate in April.
• It was the fastest annual growth in retail sales for four months. In the month retail sales grew by 1.16 per cent, up from the 0.82 per cent gain in April.
• Spending on jewellery was down 12.1 per cent over the year with household equipment & audio visual equipment up 6.6 per cent and car sales up 7.6 per cent. At the other end of the scale, communications equipment rose by 25.3 per cent in the year to May with construction and decorating materials up 16.8 per cent and furniture up 15.1 per cent.
• Industrial production rose at an 8.8 per cent annual rate in May, in line with forecasts and up from the 8.7 per cent annual rate in April. In the month, industrial production lifted by 0.71 per cent in May, up from 0.70 per cent growth in April.
• Pharmaceutical manufacturing rose 14.9 per cent over the year with non-ferrous metal smelting up 14.2 per cent and Railroad, marine, aerospace and other transportation equipment manufacturing was up 14.1 per cent. Crude steel rose by just 2.6 per cent with pig iron up 0.2 per cent, crude oil up 0.2 per cent and coke down 3.1 per cent.
• Urban investment rose at a 17.2 per cent annual rate in the five months to May, above the forecast average (17.1 per cent). Primary industry investment rose by 20.8 per cent over the period with secondary industry up 14 per cent and tertiary industry up 19.5 per cent.
• Civil (private) fixed asset investment was up by 19.9 per cent in the five months to May compared with a year ago, down from 20.4 per cent in the first four months.
• Real estate investment was up by 14.7 per cent in the five months to May compared with a year ago, down from 16.4 per cent in the first four months. Residential investment rose by 14.6 per cent; office rose 16.2 per cent; and commercial space rose by 23.6 per cent.
• The M2 money supply was up by 13.4 per cent in May on a year ago with outstanding loan growth up 13.9 per cent and new Yuan loans totalled 870.8 billion Yuan in May, up from 774.7 billion Yuan in April.
• 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 10^th of each month. China is Australia’s largest trading partner and changes in the Chinese economic have major implications for the Aussie economy
• The latest data have no implications for monetary policy in Australia.
• Credit and money supply measures indicate that there is healthy support for activity to continue at close to current growth rates.

What is the importance of the economic data?

• 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 10^th 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 for interest rates and investors?

•  The latest data have no implications for monetary policy in Australia.
• Credit and money supply measures indicate that there is healthy support for activity to continue at close to current growth rates.