China: Economy remains in a soft patch – Standard Chartered

Analysts at Standard Chartered point out that China’s November data was quite disappointing as industrial production (IP) and retail sales growth fell considerably short of market expectations, at 5.4% y/y and 8.1% y/y, respectively, versus consensus forecasts of 5.9% and 8.8%.

Key Quotes

“Monthly fixed asset investment (FAI) growth stayed flat at c.8% y/y in November, recovering only moderately after slowing to 3% in July. Housing sales fell for the third consecutive month in November by 3.7% y/y (Figure 1). Data released earlier this week also suggests inflation, trade and credit growth remain on a moderating trend.”

“The economy is likely still going through a soft patch, with continued pressure from slow credit growth, a weak housing market and uncertain US-China trade negotiations. However, the downside risk to the economy remains contained. Beijing has reprioritised maintaining reasonable growth over deleveraging. We expect the government to increase the general budget deficit to 3.0% of GDP in 2019 from 2.6% in 2018, and use flexible local government special bond issuance to increase or decrease fiscal stimulus as needed.”