China: May data disappoints – Standard Chartered

Analysts at Standard Chartered point out that China’s May data was disappointing, as industrial production (IP) growth slowed to 6.8% y/y from 7.0% in April, weaker than the market expectation of 7.0%.

Key Quotes

“Average IP growth in April-May was 6.9%, compared with 6.8% in Q1-2018. While the headline does not look bad, the underlying momentum was likely weaker, as the official IP data only captures the performance of companies above a designated size and possibly understates difficulties faced by smaller players. Meanwhile, the services production index was little changed, up 8.1% YTD in May.”

“By comparison, the slowdown in retail sales and fixed asset investment (FAI) growth was more prominent. Retail sales growth slowed to 8.5% y/y from 9.4% in April.”

“The May data reinforces our view that China’s economy faces short-term headwinds, including (1) a continued housing market downtrend; (2) slower credit growth and tighter financial regulations that have increased corporate borrowing costs and resulted in more debt defaults; and (3) plateauing export growth, and a potential continuation of US-China trade tensions.”