China: Slower IP growth belies improving demand – Standard Chartered

Sandeep Kanihama FXStreet Contributor

Analysts at Standard Chartered suggest that today’s Chinese economic releases point to green shoots in its economy as despite industrial production (IP) growth slowing to 5.3% y/y in January-February (against consensus of 5.6% and 5.7% in Q4-2018), they believe demand – the driver and leading indicator of economic cycles – has improved.

Key Quotes

“Measured in real terms, retail sales growth picked up to 7.1% y/y in the first two months of 2019 from 6% in Q4, while fixed asset investment (FAI) growth edged up to 5.2% from 4.8%. In other words, seasonality and destocking, rather than a continued domestic-demand slowdown were the underlying reasons for slower IP growth at the beginning of 2019.”

“We maintain our GDP growth forecast of 6.4% for 2019, above market consensus of 6.2%.”

“We expect the People’s Bank of China (PBoC) to cut the RRR by 100bps and the medium-term lending facility rate (MLF) rate by 20bps in Q2-2019 (see China – MLF rate cut more likely than benchmark cut, 15 February 2019).”

Author

Sandeep Kanihama

FXStreet Contributor

Sandeep Kanihama is an FX Editor and Analyst with FXstreet having principally focus area on Asia and European markets with commodity, currency and equities coverage. He is stationed in the Indian capital city of Delhi.

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