Chinese data was a mixed bag in June. Here’s a quick round-up:
Here are the key takeaways:
- The economic data was in line with expectations but confirmed an economic slowdown. Markets will now be watching to see if policymakers support their 7.5% growth target for 2013.
- Power consumption increased for the industrial sector, but industrial production moderation in June.
- The decline in total social financing and broader money supply as indicated by M2 was because of the run up in interbank rates in June and the resulting cash crunch. But “the robust new loans reading in June suggests that the backbone of China’s financing was still functioning even in a chaotic time,” according to Bank of America’s Ting Lu. But some economists expect declining nonbank and total credit growth in the second half of the year.
- The export data showed both a decline in speculative Forex inflows and a weak external environment. But we did see a rise in commodity imports, which was helped by declining commodity prices. The 10.8% rise in crude oil output, following the rise in crude oil imports suggests some improvement in investment activity.
- The key policy takeaway from the trade report was that the strength of the yuan can’t be justified.
- The decline in producer prices continues to highlight the nation’s excess capacity problems.
- Chinese manufacturing deteriorated in June. The employment sub-index of the official PMI report has been below 50 for 14 straight months.
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