China’s August data beats expectations, adds evidence of recovery

HONG KONG - Upside surprises in August data releases suggest that China’s economy is bottoming out. Industrial production and retail sales growth was stronger than expected, reflective of the impact of Beijing's mini stimulus. Investment growth picked up on the back of accelerating infrastructure investment and rebounding manufacturing investment. HSBC says that, coupled with the recent improvement in China's PMIs, the fresh data implies that growth will likely stay above 7.5% in coming quarters.

Industrial production (IP) growth exceeded expectations by a wide margin, up to a 17-month high of 10.4% on-year in August from 9.7% on-year in July, driven by faster growth inf electricity and heat power supply, transportation equipment, and electric machinery equipment production. Infrastructure investment expanded 29.3% on-year in August, the highest since December 2009 and up from 24.8% on-year in July. Meanwhile, manufacturing investment rebounded on-year from 17.1% in July to 22.5% in August, the highest level in more than a year.

Retail sales growth edged up to 13.4% on-year in August from 13.2% in July, slightly higher than expectations. Real growth in the retail sector rebounded to 11.6% on-year, compared with 11.3% in July, and an average of

11.9% on-year for the second quarter of 2013. By products, consumption for apparel, home appliance, furniture and cosmetics accelerated, while sales in automobile and jewellery slowed. www.hsbc.com (ATI).