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Fast Comment ChinaActivity data with no signs of a rebound

  1. Stimulus has not yet boosted economic growth
  2. At best, growth has been stable in the first two months of 2019
  3. Growth should rebound somewhat in Q2
Stimulus has not yet boosted economic growth
Following the announcement of several kinds of measures to boost economic growth, many had hoped for the January/February hard economic data to show signs of a growth rebound, but that did not turn out to be the case. As usual, January and February data are published together to avoid distortions from the Lunar New Year holidays due to changes in the timing of the New Year celebrations from year to year.
At best, growth has been stable in the first two months of 2019
Fixed investment growth performed best by increasing from 5.9 percent y-o-y in December to 6.1 percent y-o-y in January/February. This masks lower growth of investments by industrial companies but higher real estate investments. Retail sales growth was stable at 8.2 percent, but it was, after all, probably too early to have hoped for a boost from the recently announced VAT tax cuts. Industrial production growth slowed more than expected from 5.7 percent y-o-y to 5.3 percent, the lowest in a decade. All in all, we conclude that growth was at best stable in the beginning of the year. That should ease fears of a collapse in Chinese growth but is not enough to convince market participants that China’s authorities once again are able and willing to do whatever it takes to keep growth high.
Growth should rebound somewhat in Q2
We expect more easing measures ahead and the first signs of the stimulus-induced rebound in economic growth in the coming couple of months.


Disclaimer

Bjarke Roed-Frederiksen

Senior Economist

Latin America and China

bjro03@handelsbanken.dk

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