Chart of the week

Data published on 17 April by China’s National Bureau of Statistics (NBS) largely bettered expectations. While the Bloomberg consensus expectation was for Chinese growth to slow again in the first quarter of 2019, it stabilised at 6.4% year-on-year. This positive surprise is primarily down to March’s strong pick up in the pace of industrial production from +5.7% to +8.5% year-on-year. Retail sales and investment expenditure also gained pace, albeit to a lesser extent. Earlier this month, PMI (1) surveys, credit expansion data and export numbers all surprised to the upside.

OUR ANALYSIS

China’s improved economic data for March demonstrate the efficiency of support measures rapidly implemented in response to heightened trade tensions with the US. They will continue to produce results for months to come. This turnaround should reassure the government that its 6–6.5% growth target for 2019 is within reaching distance, and all the more so now that a trade agreement with the US appears to be taking shape.

Against this backdrop, the need for the government to put additional short-term support measures in place has diminished, but it is still too soon to expect the authorities to apply the brakes. In fact, China’s challenge is not only to avoid crushing growth, but also to avoid worsening its economic imbalances. The nation oscillates between policy easing, as is currently the case, and tightening. If the improvement continues, we can expect to see yet another policy shift in the second half of the year.

(1) PMI : PMI indices are confidence indicators that summarize the results of surveys conducted among company purchasing managers. A value greater than 50 indicates a positive sentiment in the sector concerned (manufacturing or service)

(2) GDP : main economic indicator for measuring economic production within a given country

The opinion expressed above is dated April 17, 2019, and liable to change.

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