A Fresh Worry: Chinese Growth Slowed Last Month

May 15, 2019

Asian stock markets had taken the North America upward cue, posting gains on Wednesday of 1.9% in China, 0.6% in Japan and Hong Kong, 0.4% in Taiwan, and 0.5% in South Korea but that was before news of soft Chinese industrial production, retail sales, and business investment.

In European trading, stocks are down 1.0% in Italy, 0.6% in Germany, 0.5% in France, and 0.4% in Spain. The British Ftse is flat, but U.S. futures point to a likely drop at the open.

Among ten-year sovereign debt yields, there have been declines of 6 basis points in British gilts, 5 bps in German bunds, and 4 bps in the U.S. Treasury rate.

WTI oil has softened 0.9%, while gold firmed 0.3%.

The dollar has appreciated 0.4% against the Australian dollar, 0.3% versus the kiwi, 0.2% relative to the euro, peso, and sterling and 0.1% vis-a-vis the loonie and yuan. Bucking that uptrend, the dollar has fallen 0.3% against the yen and 0.1% versus the Swiss franc.

The 12-month increase in Chinese industrial production dropped to 5.4% in April from 8.5% in March and an average of 6.2% in 2018. The comparable increase in retail sales slowed to 6.2% last month from 8.7% in March and 9.6% last year. Fixed asset investment in January-April was 6.1% greater than a year earlier, down from  an on-year increase of 6.3% in the first quarter.

China also reported unemployment of 5.0% in April, down from 5.2% in March but above the 4.8% low last November. Year-to-date growth in property investment of 11.9% in April versus 9.5% in full-2018 reflects a resilient sector.

Today’s release of European national income accounts confirmed the flash estimated Euroland GDP growth of 0.4% last quarter and 1.2% from the first quarter of 2018. The year-on-year pace matched that for the final quarter of 2018 but is only half the 2.4% increase between 1Q17 and 1Q18.

Among major economies within the euro area, GDP growth accelerated in Germany, Italy, and Spain but stayed level with the 4Q18 growth rates in France and the Netherlands. GDP growth also slowed in Belgium, Finland, and Cyprus but sped up in Portugal.

In Eastern Europe, GDP growth accelerated in Poland and Romania but slowed in the Czech Republic.

Employment in the euro area went up 0.3% on quarter and 1.3% on year during the first quarter of this year. Those changes matched ones in the final quarter of 2018.

On-year Japanese M2 money growth of 2.6% in April surprised forecasters on the upside. Money growth had slowed from 17% in 2016 to 4.0% in 2017, 2.9% in 2018 and 2.3% in the first quarter of this year. Separate Japanese data reported today showed 1) a deeper 33.4% on-year decline of machine tool orders in April and 2) zero percent on-year change in construction orders in March following a drop of 3.4% posted in February.

Australian consumer sentiment, according to the Westpac index, recorded back-to-back monthly increases of 1.9% in February and 0.6% in March following a 2.0% drop in January.

Australia’s quarterly wage cost index went up 0.5% versus the final quarter of 2018 and 2.3% for a third straight quarter compared to a year earlier.

French CPI inflation returned to February’s 1.3% in April after dipping to 1.1% in March. Polish CPI inflation rose by a further half percentage point to a 17-month high of 2.2% last month.

Italian industrial orders were 3.6% fewer in March than a year earlier.

Central bank interest rates at the National Bank of Poland and National Bank of Romania were kept unchanged at 1.5%¬† and 2.5%, respectively. The previous change of Poland’s rate was a cut of 50 basis points in March 2015, making this the longest period without a change. Romania’s previous central bank interest rate changes were a pair of 25-basis point hikes in January and May of last year.

South African retail sales contracted 0.7% on month in March, slashing the 12-month rate of growth to 0.2% from 1.4%.

Turkey’s first-quarter jobless rate averaged 14.7%, 4.1 percentage points higher than a year earlier. A 3.8% year-on-year decline in Turkish retail sales in March was the smallest such drop since last September.

South Korean unemployment rose to a 3-month high of 4.1% last month.

After a sound 1.7% advance in March, U.S. retail sales under-performed in April, dipping 0.2% on month. Sales in February-April only averaged a 0.7% rise from the prior three months.

The New York regional Empire State manufacturing index improved 7.8 points to a 6-month high of 17.8 in May. Such had been as low as 3.7 in March but at 21.4 last November.

Canadian consumer price inflation edged up 0.1 percentage point to the Bank of Canada’s target of 2.0% in April. Core CPI was marginally below that threshold.

Still ahead: U.S. existing home sales.

Copyright 2019, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

 

 

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