28 Jan 2016
China: Proprietary indices point to sluggish growth - Nomura
FXStreet (Delhi) – Research Team at Nomura, notes that the China composite leading index continued to edge down in December, consistent with the cooling heat-map.
Key Quotes
“Our China Composite Leading Index (CLI) edged down further in December. Only one component – production of sedans – continued to contribute positively in December, while the remaining eight contributed negatively, led by quasi-money supply, production of metal-cutting machinery and chemical fibre.
Moreover, the China heat-map, another proprietary tool that complements the CLI and is used to gauge growth momentum, cooled in December as well.
The China Growth Surprise Index (CGSI)1 also fell in December, with most December data releases disappointing forecasts. The only exception was trade growth, with export and import growth both higher than expected.
The China Stress Index (CSI) remained largely unchanged at 101.3 in Q4 from Q3. By component, the rapid expansion of non-bank credit, higher property loans from rising property sales and domestic credit expansion are the main causes of stress.
Overall, the declining CLI and the cooling heat-map are consistent with a lower MNI business sentiment index, pointing to still-weak growth momentum in January. Moreover, the falling CGSI and relatively high CSI suggest that structural challenges and headwinds remain, while deprecation pressure on CNY continues. We continue to expect real GDP growth to slow to 5.8% in 2016 from 6.9% in 2015.”
Key Quotes
“Our China Composite Leading Index (CLI) edged down further in December. Only one component – production of sedans – continued to contribute positively in December, while the remaining eight contributed negatively, led by quasi-money supply, production of metal-cutting machinery and chemical fibre.
Moreover, the China heat-map, another proprietary tool that complements the CLI and is used to gauge growth momentum, cooled in December as well.
The China Growth Surprise Index (CGSI)1 also fell in December, with most December data releases disappointing forecasts. The only exception was trade growth, with export and import growth both higher than expected.
The China Stress Index (CSI) remained largely unchanged at 101.3 in Q4 from Q3. By component, the rapid expansion of non-bank credit, higher property loans from rising property sales and domestic credit expansion are the main causes of stress.
Overall, the declining CLI and the cooling heat-map are consistent with a lower MNI business sentiment index, pointing to still-weak growth momentum in January. Moreover, the falling CGSI and relatively high CSI suggest that structural challenges and headwinds remain, while deprecation pressure on CNY continues. We continue to expect real GDP growth to slow to 5.8% in 2016 from 6.9% in 2015.”