Fixed asset investment in China for the first five months of this year declined, dragged by significant faltering of investment growth in the month of May. Recent data flow suggests that China’s growth momentum has started to fade, after a strong rebound in March.
Fixed asset investment for the first five months declined to 9.6 percent y/y, weighed by falling growth of investment, which eased to 7.4 percent compared to 10.7 percent in the first quarter.
“We still maintain our Q2 GDP forecast of 6.5 percent, unless there is a significant improvement in June’s PMI figure due this week,” ANZ reported in its research note.
Moreover, heavy rainfall in the recent weeks has presented a downside risk to growth and upside risk to inflation. Flood events are being increasingly reported. Areas affected include the Yangtze River Economic Belt and the Pearl River Delta.
Meanwhile, industrial production may not be able to maintain the mark of 6.0 percent y/y in June. In addition, potential flood events in recent days also exert upward pressure on vegetable prices that may change the baseline forecast of 2.0 percent y/y in June. Also, there has been significant improvement of producer prices with PPI increasing all the way from -5.9 percent y/y at the end of 2015 to -2.9 percent last month, the report added.
“Since early April, we have adopted a view for a less aggressive monetary policy and see only one cut of reserve requirement ratio for the rest of 2016 as the threat of deflationary risk has waned significantly,” said Raymond Yeung, ANZ Research.
The material has been provided by InstaForex Company – www.instaforex.com