FXStreet (Barcelona) – Tim Condon, Head of Research & Chief Economist, Asia, sees the housing sector leading edge of a slow economic recovery in china, and further believes that 2Q will mark the bottom in GDP growth.
Key Quotes
“The May housing market data showed another acceleration in sales growth – to 16.4% YoY from 7.7% – and another narrowing in the contraction in starts – to -12.1% from – 16.6%. Housing starts have historically followed home sales with a six-month lag and we are optimistic that even if the extent of over-building means a longer lag in the current cycle, a sustained increase in sales will eventually translate into stronger construction activity.”
“We don’t expect residential construction to contribute positively to GDP growth this year but we expect it to be less of a drag than last year.”
“The good news was limited to housing, which we see as underscoring the importance of the relaxation of macroprudential property-cooling measures. There was less evidence in the other May activity data of the efficacy of macro easing, which started last November. Year-over-year industrial production growth surprised on the upside at 6.1% (consensus 6.0%, prior 5.9%) but sequential growth slowed to 0.52% from 0.58%.”
“Retail sales growth at 10.1% YoY was in line and up smalls from 10.0% in April but year-to- date fixed asset investment growth slowed to 11.4% from 12.0%. Monthly FAI growth accelerated to 9.9% from 9.6% on a pick-up in real estate investment (to 2.4% from 0.5%).”
“We think the second quarter will mark the low for year-over-year GDP growth. However, we don’t think the data were sufficiently bad to warrant a weekend easing. We think further monetary easing will take evidence that the bottoming in growth is not being followed by a bounce sufficient to get close to the “about 7%” full-year target..”
(Market News Provided by FXstreet)