China: Stable monthly performance - NAB

Gerard Burg, Senior Economist at NAB, notes that China’s industrial production grew strongly in April – increasing by 7.0% yoy (compared with 6.0% yoy in March) and trends were generally strong across a range of key industrial sectors – with steel output rising to record levels, while there were strong increases in motor vehicles, consumer electronics and electricity output.

Key Quotes

“Growth in fixed asset investment slowed further in April – down to 6.1% yoy (compared with 7.2% in March). Reflecting the upturn in producer prices (which flow through into investment good prices), real investment slowed faster – to 3.2% yoy (from 4.7% previously).”

“China’s trade balance returned to normal in April, with a surplus of US$28.8 billion, following the unexpected trade deficit in March. A rebound in exports was the key driver of this result.”

“China’s retail sales data softened in April – with real retail sales growth slowing to 7.9% yoy (compared with 8.6% previously). Recent consumer confidence trends have remained strong, with the survey reading easing slightly in March to 122.3 points (compared with a 24 year high of 124.0 points in February).”

“China’s new credit issuance declined by 14% yoy over the first four months of 2018. While bank lending has continued to increase, tighter regulation of shadow banking has resulted in other lending falling sharply.”

“In mid-April, the People’s Bank of China (PBoC) announced a surprise 100 basis point cut to the Reserve Requirement Ratio. However the cut had a some strict conditions – the majority of funds released by the change were to be used to repay central bank loans under the Medium Term Lending facility, while the remainder (less than one-third) were only permitted to be loaned to small businesses. Monetary policy stability appears likely in the short term, with the PBoC continuing its “prudent and neutral” stance.”