Earlier today, China released a slew of weaker-than expected February economic data. Growth in industrial production (+8.6%), retail sales (+11.8%), and fixed asset investment (+17.9) all disappointed.
This comes on top of Saturday’s stunning trade report that showed China’s exports plunged by 18.1%.
Seeing enough, Wall Street’s economists have begun slashing their forecasts for GDP growth.
Bank of America Merrill Lynch’s Ting Lu just lowered his full-year GDP growth forecast to 7.2% from 7.6%.
“Markets have been quite negative on the Chinese economy in the past months, and will likely respond negatively to today’s weak activity data,” warned Lu.
Ahead of today’s data, the consensus on Wall Street was for 7.5% growth, which was in line with the 7.5% growth goal set by Chinese policymakers earlier this month.
Most economists agree that 7.5% is a very lofty goal considering Beijing’s efforts to reign in loose credit standards and clamp down on corruption.
“New leaders are now facing a critical test: whether they can stabilise the economy, without significantly compromising the progress of lowering debt risks,” said Societe Generale’s Wei Yao. “We think that they will try to send clear easing signals but continue to refrain from any big stimulus program. Cutting the required reserve ratio is an option, but it is more a gesture than for real impact.”
“Q1 GDP growth falling below 7.5% is now pretty much certain and something barely above 7% looks quite likely,” added Yao.
Earlier today, China Premier Li Keqiang was asked about that 7.5% target.
“Li skillfully dodged a question on how far Beijing would let economic growth slip before it steps in with policy measures to support activity,” reported Reuters’ Adam Rose. “Instead, he repeated the government’s line that job creation takes precedence over growth.”