China: Activity indicators weaken in May, trade concerns rising - NAB

Tony Kelly, Senior Economist at NAB, notes that China’s industrial production eased in May, but remained within the range it has been in since early 2017.

Key Quotes

“Trends were mixed across the key industrial sectors.”

“Fixed asset investment growth weakened further in May; on a three-month basis, the annual growth rate, in nominal terms, is at its lowest level since 1999.”

“Government policies implemented to cool the residential property sector have impacted house price growth although there are tentative signs that house price growth for existing dwellings is stabilising. Growth in housing sales has also slowed significantly but so far construction activity has remained strong.”

“Trade tensions between China and the United States remain a major source of concern. In particular, the risk of a escalating cycle of retaliatory measures has increased, with tariffs set to be raised in early July by both the US and China, and the US already flagging a further round of tariff increases (covering $200b worth of imports).”

“China’s retail sales data softened noticeably in May both on a nominal and real basis.”

“China’s new credit issuance declined by 15.5% yoy over the first five months of 2018.”

“The People’s Bank of China (PoBC) is trying to manage a slowdown in credit growth while at the same time ensuring that the economy grows at an acceptable rate - the focus appears to be on ‘stability’.”