Everyone knew it would be bad.
But I’m not sure anyone expected it to be as bad as it turned out to be.
China reported the industrial output/ fixed asset investment/ retail sales trio on Monday. Expectations were that the headline prints on the closely-watched activity data would show a simultaneous contraction for the first time in history.
Note that these figures are combined for January-February in order to smooth out seasonal effects around the Lunar New Year holiday. Obviously, this year’s numbers were seen taking a hit from the draconian measures adopted in China to contain the spread of the coronavirus.
Well, it’s bad, ladies and gentlemen. And by that, I mean that January-February retail sales in China posted a 20.5% drop, versus expectations of a 4% decline. Fixed asset investment plunged 24.5%, compared to the 2% contraction consensus expected.
Industrial output tumbled 13.5% against expectations for a 3% decline.
Looking at the range of estimates, it’s predictably wide. And yet, retail sales still missed even the most pessimistic guess from nearly two-dozen economists. The range was -14% to +7.9%.
On IP, the range was -13% to +4.5% and on FAI, it was -20% to +5.5%. So, these figures are worse than the most dour projections.
And, insult to injury, the end-February surveyed jobless rate jumped a full percentage point to 6.2% from 5.2%.
You should note that it is impossible to make heads or tails of this data. The entire Chinese economy was effectively shuttered for weeks upon weeks and then you have to throw in the holiday, which was extended.
On the bright side, this argues for more fiscal stimulus from Beijing, so there’s always that perverse, silver lining.
If bad news is good news, horrible news is even better.
The PBoC injected $14.3 billion in liquidity via the one-year lending facility on Monday, but kept the rate unchanged. That, in turn, means the loan prime rate (the de facto benchmark) will likely remain unchanged later this month too, barring another MLF between now and the 20th.