China: April data show hit from trade war pre-Geneva – ABN AMRO

April data confirm hit from trade war escalation last month. Growth momentum expected to pick up again following Geneva truce, but uncertainty remains, ABN AMRO's economist Arjen van Dijkhuizen reports.

April data confirm hit from trade war escalation last month

"China’s monthly activity data for April published this morning showed the impact from the escalation of the US-China trade war last month. Following an acceleration in March helped by trade frontloading and stimulus, annual growth of industrial production, retail sales and fixed investment came down in April again. Industrial production slowed to 6.1% y/y, although coming in a bit better than expected (March: 7.7%, consensus: 5.7%), and to 0.2% m/m s.a. (March: 0.4%). Retail sales growth slowed more than expected, falling to 5.1% y/y (March: 5.9%, consensus: 5.8%); in monthly terms, retail sales slowed to 0.2% m/m s.a. (March: 0.5%)."

"This suggests that the supply side remains stronger than the demand side, with domestic demand impacted by the property sector downturn and weak confidence. Fixed investment slowed to 4.0% y/y in January-April (Jan-March/consensus: 4.2%). Meanwhile, the April data confirmed that the property sector is not yet out of the woods, with the annual contraction of property investment and residential property sales deepening. Despite the slowdown in activity shown in the April data, the surveyed jobless rate in urban areas edged a bit lower, to 5.1% (March/consensus: 5.2%)."

"Going forward, we expect growth momentum to pick up again in the coming months, following the truce agreed by the US and China in Geneva last week – with bilateral tariffs temporarily down to 30% (on Chinese exports) and 10% (on US exports), from 145% and 125%, respectively. We still expect China’s loan prime rates to be cut by 10bp tomorrow, mirroring similar policy rate cuts earlier this month, and in line with consensus. All in all, upside risks to our growth forecasts have risen, although trade-related uncertainty will remain. We will publish revised growth forecasts in our May Global Monthly later this month."