China: H2 outlook depends on the authorities’ policy stance - BBVA

Today’s data showed that Q2 GDP growth came in at 6.2%, matching expectations. According to the Research Department at BBVA, growth deceleration appears manageable. 

Key Quotes: 

“The Q2 GDP growth came at 6.2% y/y (versus 6.4% y/y in Q1), in line with market consensus. On sequential terms, the economy grew by 1.6% q/q, slightly higher than that of Q1 at 1.5% q/q. Growth slowdown in Q2 is widely expected amid the unsettled trade war with the US and the domestic structural obstacles such as debt overhang and financial risks.”

“The outturn proved the resilience of China’s economy even in the face of escalating trade tensions with the US. Looking ahead, the growth outlook in 2H 2019 depends on the authorities’ policy stance. We anticipate more monetary and fiscal easing measures to be deployed to sustain growth momentum and offset intensifying headwinds from unsettled trade tensions.”

“Altogether, the Q2 GDP out turn has added certain upside risk to our full-year growth projection of 6.0% y/y although the risk of growth deceleration in 2H 2019 remains high.”

“Our BBVA MICA model yields a GDP prediction based on monthly data at 6.3% for Q2, in line with the growth slowdown.”