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Early Thursday sees the annualized figures of January month retail sales and industrial production from the National Bureau of Statistics of China at 02:00 GMT. Investors would emphasize more on the monthly release as a week-long Lunar New Year holiday in February makes present updates the year’s first data dump from the dragon nation.  

Retail sales growth is expected to have softened to 8.1% year-on-year against 8.2% reported prior whereas industrial production is seen following macro weakness with 5.5% YoY figure versus 5.7% previous.

Ahead of the release, analysts at Westpac say,

“China activity data is the main focus in Sydney trade, with Jan-Feb readings on industrial production, retail sales and fixed asset investment due at 1pm Syd/10am local. We are most interested in IP. The last reading was 5.7%yr in Dec, a modest improvement from 5.4% in Nov which was the slowest pace of growth since the depths of the GFC. Note that this is still a decent rate of expansion, in contrast to the PMI surveys which have been touted as implying outright contraction. Only a combined Jan-Feb reading is published, to avoid some of the wild swings that we see on e.g. trade data around lunar new year. Consensus is 5.6%yr for Jan-Feb 2019 vs Jan-Feb 2018. Retail sales are seen up 8.2%yr, investment 6.1%.”

It should also be noted that Bloomberg favored investment recovery to be seen in today’s data dump. As per its latest report on the scheduled release, “China’s first batch of major official indicators this year are forecast to show that an investment recovery that began in mid-2018 is set to continue, but the economic slowdown and trade war are still undermining factory output and consumption.”

How could it affect the AUD/USD?

Cooling factory activities in China and its trade spat with the US continues to adversely affect the headline statistics off-late. Being the largest trading partner, negatives for China also weigh on the Australian Dollar (AUD).

Given the forecasts suggesting an overall weakness to prevail in headline data, the Aussie might come under pressure after the announcement.  

While weak industrial production is on the cards and may recall 0.7055 for the AUD/USD pair, the less expected decline in retail sales growth and present weakness of the US Dollar (USD) could propel the quote to 50-day simple moving average (SMA) of 0.7135.

About China’s industrial production data

Industrial output is released by the National Bureau of Statistics of China. It shows the volume of production of Chinese Industries such as factories and manufacturing facilities. A surge in output is regarded as inflationary which would prompt the People’s Bank of China would tighten monetary policy and fiscal policy risk. Generally speaking, if high industrial production growth comes out, this may generate a positive sentiment (or bullish) for the CNY (and AUD), whereas a low reading is seen as negative (or Bearish) for the CNY (and AUD).

About China’s retail sales data

The Retail Sales report released by the National Bureau of Statistics of China measures the total receipts of the retailed consumer goods. It reflects the total consumer goods that the various industries supply to the households and social groups through various channels. It is an important indicator to study the changes in the Chinese retail market and reflecting the degree of economic prosperity. In general, A high reading is seen as positive (or bullish) CNY, while a low reading is seen as negative (or bearish) for the CNY.