China's Latest Economic Data Dump Stunk

china foundation railway line

The latest batch of economic data from China suggest that growth continues to be sluggish. 

Let’s walk through each of them. 

First, industrial production climbed 9.2% on the year, slightly below expectations for a 9.4% rise. Industrial production in May was led by heavy industries, with steel products up 11.3% year-over-year (YoY), up from 8.1% in April. Auto production slowed to 15.7%, from 18.3%, according to Bank of America’s Ting Lu. 

Second, fixed asset investment (FAI) was up 19.9% on the year, and year-to-date FAI was up 20.4% on the slightly below expectations for a 20.5% gain. Remember FAI is a good gauge of a country’s investment activity. 

A breakdown of FAI activity showed that manufacturing FAI eased to 16.5%, from 17.9% because of “sluggish” external demand. Railway FAI slowed significantly to 24.2% YoY, from 62% in April. But year-to-date railway FAI was up 24.5%, compared with -41.6% last year for the same period. Planned investment, which is a leading indicator of FAI eased to 15.4%, from 17.9%. And finally, property FAI fell to 19.4%, from 23.2% the previous month. 

For the month of May, Lu writes that the 2.9% fall in producer prices could cause real FAI to rise a bit. 

Third, retail sales climbed 12.9% on the year, in line with expectations. Industries impacted by the government’s crackdown on corruption, like the restaurant industry saw revenue rise 9.2%, from 7.9% in April. Gold and jewelry sales were up 38.4% because of weakness in gold prices. 

Fourth, consumer prices were up 2.1% and producer prices fell 2.9%.

What does all of this mean?

Lu writes that the latest data suggests that Q2 GDP growth will be 7.6 – 7.7%, and quarter-over-quarter growth should be 1.8%. 

But the government, that is looking for about 7.5% growth for 2013, is unlikely to announce new stimulus and is expected “maintain the current accommodative fiscal and monetary policy.”

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