Chinese Data Fail to Dispel Concerns about World’s Second Largest Economy
July 17, 2023
Although mixed relative to analyst expectations, a large batch of Chinese economic data released today signals a need for additional fiscal and monetary policy support if the Xi government’s 5% growth target is to be met.
- Real GDP expanded at a 0.8% quarterly pace last quarter, which was just of a third as strong as the first quarter’s expansion. A 6.3% advance compared to 2Q 2022 was a full percentage point less than forecast and resulted in on-year growth of 5.5% in the first half of the year.
- Retail sales rose only 0.2% last month and posted the smallest 12-month increase (3.1%) since December 2022 after on-year increases of 12.7% in May and 18.4% in April.
- A 3.8% rise in fixed asset investment during January-June was the smallest year-to-date advance in 30 months.
- Chinese capacity utilization averaged 74.5% in the first half of 2023, down from 75.4% in the first half of 2022 and 77.8% in the first half of 2021.
- Property prices were unchanged in June both compared to May and the same month a year earlier.
- These weak trends came today on the heels of last week’s reports a 28-month low zero percent rate of consumer price inflation and on-year declines of 12.4% and 6.9% in exports and imports during June.
- On a brighter note, industrial production recorded a 0.7% monthly increase in June after 0.6% in May. This lifted its on-year increase to a 2-month high of 4.4%. Also, the unemployment rate stayed at 5.2% for a third consecutive month, which has been the lowest level since December 2021.
The dollar in overnight trading fell 0.4% against the yen, 0.3% relative to the Swiss franc and 0.1% versus the euro but climbed 0.5% vis-a-vis the Australian and New Zealand dollars as well as the Turkish lira. In other overnight financial market action, ten-year sovereign debt yields dropped five basis points in the United States, Germany and France and by four bps in Great Britain. U.S. stock futures are marginally lower. Equities closed down by 0.9% in China, up 0.8% in India and little changed in Japan. Share prices in Europe shows declines of 1.2% in France but just 0.2% in the U.K. and Italy. Oil’s price, which experienced a strong advance last week in delayed response to Saudi production cutbacks, has settled back 1.3%, while gold and Bitcoin are down just 0.2% and 0.1%.
Italian CPI inflation in June has been reconfirmed at a 14-month low of 6.4%, having crested last October and November at a 37-year high of 11.8%. Core inflation of 5.6% is down just 0.7 percentage points from February’s high, however.
Bulgarian CPI inflation slowed 1.4 percentage points in June to an 18-month low of 8.7%. That’s less than half the 292-month high of 18.7% last September.
Croatian CPI inflation in June was revised down 0.1 percentage point to a 15-month low of 7.6%.
New Zealand’s June service sector purchasing managers index fell back from 53.7 in May to a 2-month low of 50.8 in June, indicating modestly positive activity growth.
Britain’s Rightmove house price index this month dropped 0.2% on month, slicing its 12-month rate of increase more than in half to 0.5%.\
The see-sawing NY Fed Empire State manufacturing index fell to 1.1 in July following readings of +6.6 in June, -31.8 in May, +10.8 in April, -24.5 in March and -5.8 in February.
Copyright 2023, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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