Data Out of China Continues to Disappoint, But May Not Indicate Hard Landing

March 13, 2014 in Forex Fundamentals and News

China’s scored somewhat of an unfortunate hat-trick today.

Three pieces of economic data released today by the Asian powerhouse all missed market consensus handily.

Industrial production

Year to date industrial production (February) grew only 8.6% compared to analysts’ forecasts for 9.5%, and 9.7% during the year ago period.

According to analysts industrial production in China may be hampered due to rising inventories and the higher interest regime prevailing in the country since last year, as Chinese regulators crack down on a credit bubble and shadow banking infrastructure.

An inkling of this data was probably indicated by the sharp fall in copper prices witnessed in the past few days across the globe. Prices of iron ore, too, have been on a downtrend.

Retail sales

Year to date retail sales (February) grew 11.8% compared to market expectations of 13.5% and the previous period figure of 13.1%.

According to one view, retail sales in China could have been adversely affected by an environment of disinflation and a drive to weed out corruption at all levels.

The deceleration in retail sales, an important indicator of spending patterns in the economy, adds another supporting dimension to the growing opinion that China is gripped by an economic slowdown.

Fixed assets expansion

Year to date urban spending on fixed assets grew 17.9% against consensus expectation of 19.4%. The year ago period showed growth of 19.6%. The soft data indicates the downward pressures on the Chinese economy.

Though the above data points do raise concerns about the Chinese slowdown, analysts are still optimistic and say it is only that, and not a hard landing. It may be noted that the country still hopes to grow GDP by 7.5% during 2014, though the Chinese leadership has obliquely hinted that it may not be unduly worried if the target is not met.

Earlier this week, media reports suggested that the People’s Bank of China was prepared to adopt an easier monetary policy in the event economic growth slowed too much.

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