China’s economic momentum appeared to slow from March’s data as while Industrial Production handsomely beat expectations, Retail Sales were below the lowest estimate and Fixed Asset Investment was the weakest since Dec 1999…
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Industrial output rose 7.0 percent in April from a year earlier, versus a projected 6.4 percent in a Bloomberg survey and 6 percent in March – highest since June 2017
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Retail sales expanded 9.4 percent from a year earlier, versus a forecast 10 percent – equal lowest since Feb 06
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Fixed-asset investment rose 7.0 percent year-on-year in the first four months, compared with an estimated 7.4 percent – lowest since Dec 1999.
While the reports are supposedly among the first official readings unaffected by the Lunar New Year holiday – which skewed year-on-year comparisons for the first three months – we note that the economic surprise index for China shows the same seasonal pattern play out every year…
While offshore yuan was unaffected, US equity futures took a leg lower as the China data hit, though the moves are modest for now…
“Policy makers will likely become less concerned about slowing activity and monetary growth,” Goldman Sachs Group Inc. economists wrote in a recent note.
“We expect the government to maintain its recent policy stance because inflation is likely to remain subdued and, more importantly, uncertainties related to trade remain high.”
And as a reminder, Morgan Stanley economists recently write that the link between China’s credit impulse and the global economy “has now been broken” and justifies his answer as follows:
China’s tightening has not had a material impact on the growth cycle either in China or globally, even though its credit impulse began to weaken about 24 months ago. As deleveraging and adjustment headwinds recede, the recoveries in domestic demand in both DMs and EMs have emerged as additional global growth engines.
Ahya uses the following chart to prove his thesis…
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