Further doubts were cast over China's stabilisation were raised this weekend as retail sales and industrial production both fell below expectations.
- At 6%, industrial production (IP) was back to a 2-month low after rising to 6.8% in March. However, there are signs that the decline seen over recent years may be showing signs of slowing at least.
- Retail sales fell to a 12-month low on a YoY% basis and remains firmly within a downtrend.
- China's fixed-asset investments (labelled urban investments above) also declined.
- New loans completely missed the consensus of 900bn at 556.bn, its' lowest level since December.
Soft loan data prompted China's banking regulator to send notice telling banks to clear any loan application which may be stuck in a bottleneck, to free up funding for investment and business activity of private firms.
Since the 1990's factory output has been in structural decline whilst the economy tries to reform its way further up the value chain. However, whilst the longer-term trends are under pressure the annualised read shows the potential for a trough as it meanders around the 12-month average (something it has not done since 2013).
Taking a closer look we can see the YoY% change sits on the 3-month average, which itself is rising gently to suggest the decline may be forming trough or, at the very least, slowing its' decline.
As mentioned previously, the Greenback was showing signs of a potential turnaround against the Renminbi and recent price action has produced a prominent swing low. The rise of USDCNH has been down to a strengthening USD as opposed to PBoC weakening their currency, although it can be argued that lack of intervention to strengthen the currency to ward of speculators could be on the cards if it continues to rise at the current pace. The spread between CNH (offshore) and CNY (onshore) remains relatively calm to suggest there has been no such action as of yet, but the moment we do see such evidence we can expect the current calmness across some markets to quickly end.
China's retail, industrial and investment softens
Soft data from China's retail, factory and investment sectors over the weekend remind traders not to be too complacent, especially when the world's-second largest economy is involved.