China: Will trade tensions tempt to turn on the taps? - NAB

Gerard Burg, Senior Economist at NAB, notes that China’s monthly indicators were generally a little softer in July – below market expectations – but not overly negative.

Key Quotes

“Our expectations for weaker economic growth across the second half of the year remains unchanged – with growth to average 6.6% in 2018, before slowing to 6.25% in 2019 and 6.0% in 2020.”

“China’s deleveraging program continued in July – with new credit issuance contracting. In the first seven months of 2018, new credit issuance decreased by 15% yoy.”

“Monetary policy in China has continued to ease in recent weeks – a loosening of around 35 basis points since June. The big question mark is the direction of policy and lending going forward.”

“China’s trade surplus was marginally narrower in July – at US$28.1 billion (compared with US$41.5 billion in June) – reflecting an upturn in imports, while export values were relatively flat. Imports rose by of 27% yoy (although imports in July 2017 were particularly weak).”

“Growth in China’s industrial production was unchanged in July – increasing by 6.0% yoy. This rate was below the trend recorded since the start of 2015 (around 6.3%).”

“There was a notable slowing in China’s fixed asset investment growth in July. With investment goods prices trending higher, real investment contracted in July – down 0.9% yoy – the first fall since October 2017.”

“Real retail sales growth slowed to 6.7% yoy, the slowest rate of growth since May 2003. Consumer confidence dipped in June – falling to 118.2 points (from 122.9 points in May) – albeit this remains a historically strong result.”