China: April growth weakened due to distortions – Standard Chartered


Standard Chartered analysts point out that China’s activity weakened across the board in April with real growth rates of industrial production (IP), retail sales and fixed asset investment (FAI) slowing to 5.4% y/y, 5.1% y/y and 4%, respectively, in April from 6.4%, 7.0% and 5.2% in Q1.

Key Quotes

“The labour market was stable, with a lower unemployment rate of 5%.”

“We caution against over-reacting to a single month of weak performance. April activity was likely distorted by the following one-off factors: (1) the introduction of VAT cuts in April, which induced companies to front-load purchases in March to benefit from higher input tax deductions and accounting for the abnormal production surge in March followed by weak production in April; and (2) the longer public holidays from 1-4 May. China increased the number of working days in April to compensate for the longer May holidays, which likely delayed consumer spending from April to May. Furthermore, statistically, China tends to post slow growth at the beginning of a quarter and stronger growth in its final month.”

“We maintain our forecast of 6.5% GDP growth for 2019. We expect China to continue with its stimulus plan, including cuts to the individual income tax (last October), value-added tax (April 2019) and social-security contribution fees (May 2019). As per our estimate, the approved budget included stimulus equivalent to 1.8% of GDP.”

“We expect the People’s Bank of China (PBoC) to cut the reserve requirement ratio (RRR) by 50bps each in June and in Q3. We do not think it will use CNY depreciation as a stimulus tool, as this could backfire by destabilising domestic financial markets.”

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.

Feed news

Latest Forex News

Editors’ Picks

EUR/USD depressed around 1.1260 as recovery loses steam

The EUR/USD pair attempted to recover some ground but lost momentum around 1.1280, now near daily lows. Majors confined to tight intraday ranges amid a limited macroeconomic calendar, central banks’ pessimism. 

EUR/USD News

GBP/USD accelerates decline after losing the 1.2550 level

The Sterling is among the weakest currencies, undermined by Brexit turmoil. GBP/USD extends decline to fresh daily lows. Dollar still down against most major rivals. 

GBP/USD News

USD/JPY: unable to recoup the 108.00 level

Mixed Chinese data fell short of spooking growth concerns, Q2 GDP at 27 years low. Quiet macroeconomic start to the week in Europe and the US. USD/JPY short-term bearish as long as it remains below the 108.30 level.

USD/JPY News

Gold erases daily upside, sits comfortably above $1400

Despite a drop below the critical handle of $1400 last week, the troy ounce of the precious metal closed at $1415 but failed to push higher on Monday. As of writing, the XAU/USD pair was trading at $1410, losing nearly $5 on a daily basis.

Gold News

Forex Today: USD attempts a comeback, China growth slows, and Bitcoin recovers

The Chinese economy grew by 6.2% y/y in Q2, the weakest expansion in 27 years. Activity data showed a dramatic improvement, Antipodeans advanced further, Asian stocks traded mixed.

Read more

MAJORS

Cryptocurrencies

Signatures


  •  
  •  
  •  
  •  
  •