China: Four takeaways from first four months – Hitting the great wall
We have said activity data would slow sequentially from Q1. Four months into the reopening, China’s economic recovery can best be described as uneven, frontloaded, and still necessarily state-supported.
While April activity (predictably) came off from very strong March prints, it continued to show stark divergence between services and manufacturing. Credit, production, and investments data disappointed even our conservative estimates. Manufacturing weakness in particular can no longer be simply attributed to softness in exports.
In this note, we take stock of China’s recovery so far and draw four key observations:
- Big misses outside of services will now raise questions as to the underlying growth momentum beyond a mechanical reopening bounce
- Even with easing measures, it’s too early to assume the property cycle has turned
- Credit growth is now less of an upside risk to our forecasts
- Market fears of policy tightening have turned to easing hopes in recent weeks – but policymakers will only do so selectively
Tags:
Related posts
Post
China’s emerging deflation risk may be more worrisome than believed
China's systemic inclinations towards a low price environment, but weak prices have raised the spectre of deflation and led to rising market expectations of rate cuts this year.
Find Out More
Post
New Activity Trackers suggest momentum is waning
After a choppy first quarter of GDP data, our novel Activity Trackers (which incorporate proprietary daily sentiment data from Penta) suggest that economic momentum in EM Asia is on a softer trend in Q2 (at least outside of China) supporting our view of easing underlying inflationary pressures and diminishing appetite for further rate hikes.
Find Out More
Post
What AI means for economies, businesses, jobs & cities
Artificial Intelligence has the potential to fix the world's productivity problems, just as previous general purpose technologies such as steam power, electricity, and computers have, in our view.
Find Out More