Back on April 16, China delivered blockbuster activity data for March which, together with a better-than-expected read on Q1 GDP, helped bolster the position of those who claimed the world’s second-largest economy had likely bottomed.
According the numbers, the Chinese economy did not decelerate further in Q1, retail sales surged in March and industrial output blew away expectations for the month. By the end of April, the market was celebrating beats on pretty much every number that mattered out of China, from those mentioned above to exports to credit growth. Things had seemingly turned a corner.
Only not really. Because all of the data for March came with predictable caveats about holiday distortions and analysts were generally skeptical about the sustainability of the bounce.
Fast forward a few weeks and the data for April has been less inspiring. Headed into the closely-watched retail sales-IP-FAI trio, markets had digested PMI misses, a renewed deceleration in exports and credit growth data that fell well short of estimates for April.
Given that, it came as no surprise that April retail sales missed, rising 7.2% versus consensus of 8.6%. April industrial output whiffed as well, rising 5.4% versus an estimated 6.5%. The retail sales print was below the lowest projection (the range was +7.5% to +9.4% from 40 economists).
Fixed asset investment for the first four months of the year rose 6.1%. That too was below consensus.
Again, this isn’t terribly surprising. We’ve already seen mild weakness coming through in the April data and virtually every analyst one cared to consult was cautious about the ebullient March figures.
The problem isn’t so much the numbers as it is the timing. This shows China was, at best, not doing as well as the numbers suggested in March. At worst, it means the Chinese economy was still decelerating before Trump piled the pressure on last week.
The offshore yuan managed to snap a six-session losing streak on Tuesday, but these numbers suggest the reprieve could prove fleeting absent help from the PBoC.
As far as Chinese equities are concerned, Mainland shares are still reeling. Friday’s state-sponsored bounce was so clearly engineered by the national team that it’s hard to take any comfort in it whatsoever.
The CSI 300 is down some 5.5% for the month and although data disappointments could stoke stimulus bets and thus bolster local equities, sometimes bad news is just bad news – especially when set against a new round of Donald Trump’s “greatest” tariffs.