We just got a raft of Chinese data and at first blush it was pretty good.
The details: Q2 GDP came in at 7.5%, just above the 7.4% expected. Retail sales were up 12.4% in June, just below a 12.5% rise. But fixed asset investment beat expectations by the same margin, up 17.3% YoY. Finally, industrial production was up 9.2% YoY in June, compared to an 8.8% rise in May, and beating expectations for a 9% rise.
All of which would, typically, be good news for the Aussie dollar. But after an initial surge, it fell out of bed:
— Michael McDonough (@M_McDonough) July 16, 2014
So what gives? This morning we reported on Soc Gen’s assessment in its Asia morning call note that “better GDP growth in Q2 does not mean lower risk ahead”. They continued:
The dark cloud of the housing downturn is still hovering over the economy. The latest report from Soufun, a private data provider that monitors property prices in 100 Chinese cities, showed that the average residential property price declined 0.5% mom in June, more than doubling the pace of contraction in the previous month. The survey also indicated that new apartments offered deeper discounts, as developers were eager to boost sales in order to liquidate their inventories. Housing construction and investment data are likely to have deteriorated further in June.
Now the other thing China reported today was housing sales – and it was a nasty number: down a horrible 9.2% in the first half of 2014.
This could well be the explanation for the fall in the Australian dollar: the headline numbers might have been okay, but there’s concern about underlying weakness in the Chinese housing market.
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