A batch of April economic indicators are announced today, together with previously released trade and credit data, suggesting that the risk of growth deceleration looms large even before the escalation of US-China trade war in early May. We anticipate more monetary and fiscal easing measures to be deployed in the rest of the year in a bid to sustain growth momentum and offset intensifying headwinds from deteriorating trade relation. In our base scenario, China and the US will sort out the current quandary in this summer to avert the long-term confrontation. We therefore maintain our full-year growth projection at 6% for 2019, in line with the authorities’ range target of 6-6.5%.

April economic indicators suggest that growth slowdown is broad-based: industrial production decelerated from 8.5% y/y of March to 5.4% y/y; retail sales declined to 7.2% y/y in April from 8.7% y/y previously; fixed asset investment also decreased to 6.1% ytd y/y from 6.3% ytd y/y in March, led by manufacturing investment.

April credit data is unsatisfactory as the authorities might adopt a “wait-and-see” method given the better-thanexpected Q1 outturns. M2 growth slowed down to 8.5% y/y from 8.6% previously. Both total social financing and new yuan loans dipped to RMB 1,360 billion and RMB 1,020 billion from RMB 2859 billion and RMB 1690 billion respectively. Altogether, our BBVA MICA model yields a GDP prediction based on monthly data at 6.3% for Q2 2019, in line with the growth slowdown.

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This document was prepared by Banco Bilbao Vizcaya Argentaria’s (BBVA) Research Department on behalf of itself and its affiliated companies (each a BBVA Group Company) for distribution in the United States and the rest of the world and is provided for information purposes only. The information, opinions, estimates and forecasts contained herein refer to that specific date and are subject to changes without notice due to market fluctuations. The information, opinions, estimates and forecasts contained in this document have been gathered or obtained from public sources believed to be correct by the Company concerning their accuracy, completeness, and/or correctness. This document is not an offer to sell or a solicitation to acquire or dispose of an interest in securities.

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