China’s growth slowdown continues on July figures

HONG KONG - July economic indicators announced today, together with previously released credit data, suggest that China’s growth slowdown continued in July, says BBVA Bank. “In particular, fixed asset investment, industrial production and retail sales all dropped from previous readings and are below market expectations," the bank says.

“This indicates that headwinds mainly from domestic deleveraging and the unsettled trade war with the US continued to weigh on growth. That being said, the growth is most likely to moderate through the rest of the year.”

BBVA is predicting that China will further ease monetary policy, while fiscal policy will be more supportive for growth.

“Altogether, we maintain our 2018 growth projection at 6.5% y/y, compared with the official target rate at 6.5% and the Bloomberg consensus at 6.6%.”

July economic indicators are lacklustre: Fixed asset investment decreased to 5.5% ytd y/y from 6% ytd y/y previously (consensus: 6% ytd y/y), indicating investment slowed due to tightening regulation measures and domestic deleveraging; retail sales decelerated to 8.8% y/y from 9% y/y in the previous month (consensus: 9.1% y/y);  and industrial production remained at a low growth rate at 6% y/y as of the last month (consensus: 6.3% y/y).

The growth slowdown also pushed up the jobless rate from 4.8% to 5.1% in July.

July credit data moderated as well: Although M2 growth increased to 8.5% y/y from 8%, total social financing and new yuan loans both decreased to RMB 1,040 billion and RMB 1,450 billion, respectively.   www.bbva.com (ATI).