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Analysts at Standard Chartered point out that China’s real activity data for July was disappointing as industrial production (IP) growth remained sluggish at 6.0% y/y in July, weaker than market expectations and average growth in Q2.

Key Quotes

“The services production index slid to 7.6% y/y from 8.0%. Domestic demand weakened further. Retail sales growth slowed to 6.5% y/y from 7.1% in real terms.”

“Countrywide  unemployment edged up to 5.1%. Fixed asset investment (FAI) growth in the first seven months of this year fell to a record-low 5.5% y/y, led by a sharp decline in infrastructure investment growth.”

“Overall, the July data supports our view of a more significant deceleration of growth in H2.”

“We see China’s economy facing intensified downside pressure in the next few quarters, mainly due to the lagged effect of credit tightening and the impact of rising trade tensions with the US, adding to the case for  more accommodative policies.”

“The government has shifted its focus on stabilising growth with policies to support domestic demand, indicating that it will make every effort to achieve the growth target of 6.5% for this year amid the US-China trade war.”

“Monetary policy has already removed the tightening bias with measures to boost lending.”

“With downside likely to be curbed despite the downtrend, we expect GDP to grow 6.6% in 2018.”