seb report: encouraging signs in latest chinese data
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7/31/2019 SEB report: Encouraging signs in latest Chinese data
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China: Some encouraging signs in mixed May dataFRIDAY
15 JUNE 2012
• All in all, the May data were mixed but there were some bright spots, particularlyexports and imports and signs of improvement in the housing market. The data indicate that activity in the economy stabilised in May after the very weak data for April.Inflation decelerated more than expected and the People’s Bank of China (PBOC) cut thekey interest rate by 25 basis points to 6.31% last week (Chart 1). Combined with previouscuts in the reserve requirement ratio, this is a clear signal that government has adopted amore active macro policy. However, GDP growth will still be weak in Q2, within the7.5 to 8.0% year-on-year range; a further slowdown compared to growth of 8.1% in Q1.
• The May data support our long-held assessment that, barring a major external shock, ahard landing can be avoided. However, compared to Nordic Outlook May, the GDPforecast has been cut to 8.1% for 2012 (from 8.5%) and to 8.4% for 2013.
• Headline inflation decelerated to 3.0% in May. Food inflation dropped to 6.4% and coreinflation continues to hover close to 1.5% (Chart 2). Inflation has deceleratedsubstantially since its peak last summer and should no longer be a hindrance tofurther policy loosening.
• The official purchasing managers’ index (PMI) dropped to 50.4 in May. The arguably more
reliable Markit/HSBC PMI has been below the 50 level since November 2011 and droppedto 48.4 (Chart 3).
• Exports and imports rebounded in May and clearly beat expectations, with growthof 15.3% and 12.7%, respectively, year-on-year (Chart 4).
• Industrial production was weak, with growth at 9.6% year-on-year, and retail salescontinued to decelerate (Chart 5). However, sales of passenger cars increased by close to23% year-on-year and reached 1.28 million (Chart 6).
• Bank lending increased in May. New loans issued by financial institutions totalled 793bn yuan, up from 682 bn in April and were larger than expected (Chart 7).
• Housing prices continue to fall in year-on-year terms (Chart 8) but the number ofsales is rising, indicating the beginning of stabilisation in the housing market.
• The yuan has appreciated against the USD in recent weeks. Since the start of 2012, theyuan has gained about 1% (Chart 9).
Andreas Johnson
SEB Economic Research
+46 8 763 80 32
andreas.johnson@seb.se
Key data
Percentage change
2010 2011 2012 2013
GDP* 10.4 9.3 8.1 8.4
Inflation* 3.3 5.4 3.2 3.5
USD/CNY** 6.59 6.29 6.20 6.05
* Percentage change. ** End of period exchange rate.
Source: National Bureau of Statistics of China, Reuters, SEB.
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