Analysts at TDS note that May China retail sales, IP and Fixed Assets Investment all came in below consensus at 8.5% y/y, 6.8% y/y and 6.1% y/y, respectively and the data follows the softer aggregate financing and money supply data earlier this week.
“Retail sales have been trending lower over recent months, but the May outcome is the weakest since June 2003. A softer IP reading is not such a surprise and the y/y rate is still healthy compared to recent months. The bounce back in May PMI also suggests that IP will hold up in the months ahead, not withstanding the risks of escalating trade tensions.”
“Meanwhile Fixed Assets Investment has also been trending lower, partly as a result of tighter regulations. However, the dip in May is particularly soft. There was some surprise that the PBoC did not change its money market rates in response to the Fed hike yesterday. Today’s data is unlikely to cause too much worry in policy circles but it could fuel some pressure for further targeted RRR cuts.”
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