You are browsing the archive for China economy.

Australian Dollar Failed To Respond To Good Economic Data From China

January 18, 2013 in Forex Fundamentals and News

China industrail production risesToday’s The economic data from China came out better than expected in general.

House price Index: According to the National Bureau of Statistics of China, the change in house price index in December as released today was -0.04% and though the index again showed a decline but some improvement was there from November’s -0.7%.

Gross Domestic Product  grew unexpectedly

Chinese GDP saw an unexpected growth during the 4th quarter of 2012. The report released by China National Bureau of Statistics showed an year on year increase in the gross domestic  product as 7.9% which was not only better than the 3rd quarter’s 7.4% increase as compared to the quarter 3 of 2011 but was also better than the consensus of economists which was for 7.8% change. However the quarter on quarter change in GDP was 2.0% and was lower than the expectations of 2.3% and also the quarter 3’s quarter on quarter change of 2.2%.

Industrial production jumped up

Today’s report from National Bureau of Statistics of China showed the industrial production jumped up by 10.3% during December  2012 as compared to the December 2011. The market consensus was that the year on year change in December will be same as that of November i.e. 10.1%.

Chinese retail sales rose

Today’s data also showed an unexpected growth in the Chinese retail sales. The retail sales in December 2012 increased by 15.2%. The market consensus was for a change of 14.9% which was same as what was witnessed during the previous month i.e. November 2012.

Chinese urban investment slowed down

year to date urban investment till December showed slight decline as per the report released today. The year on year change in the urban investment (year to date) came out as 20.6%. This was slightly less than the consensus and November’s 20.7%.

Australian Dollar dropped

AUD/USD: China is the biggest importer of Australian exports with AUD/USD29.1% share as per 2011 data and any strong economic data from China goes in favor of the strength of Australian dollar. The Aussie could not manage that. AUD/USD which had gone as high as 1.0558, failed to test 1.0600 level. The last time  the currency pair had briefly touched 1.0600 was on September 14 2011. That time also it could not sustain and had fallen sharply. Since then it made two more attempts to test that level, one in December and another last week on January 10th but faced strong resistance.  Today after again failing below 1.0600, AUD/USD went as low as 1.0496 which slightly over yesterdays support of 1.0491.

AUD/JPYAUD/JPY: The pair made two attempts to break over the psychological resistance of 95.00. First time it touched 95.01 and second time 95.02 but could not sustain and fell sharply to 94.19.

AUD/JPY has been in a very volatile sideways moves for over 2 years. Every upward move had faced resistance near or below 90.00 level. The pair had broken over 90.00 on December 31st and since then moved up very strongly.

 

Chinese Economic Data – Encouraging Signs

November 12, 2012 in China

With the Japanese and the Euro-zone economies in the doldrums, and the fragile economic recovery in the US in grave danger from the ‘fiscal cliff,’ the fast-developing economies out of Asia will probably do the heavy lifting as far as global growth is concerned.

The Chinese economy has been a powerhouse of growth this decade, but of late there have been troubling signs of a slowdown in growth. The economy contracted over the last seven quarters on the trot – with growth down to a low (for China) 7.4% during the September quarter. Chinese policy-makers responded by implementing growth-oriented policies over the recent months, such as the lowering of the benchmark interest rate (twice) and reduction in the reserve requirement ratios (also twice).

In this backdrop, the recent economic data out of China has been comforting, to say the least.

October Exports

China delivered a resounding beat on estimates of its export performance for the month of October. Exports grew 11.6 % whereas analysts expected only 10% year-on-year.  This was the fastest rate of growth seen in five months.

The data led analysts to jettison fears of a ‘hard landing’ for the Chinese economy, and crank up their estimates for growth during 2013.

October imports

Imports by the Chinese economy were flat at 2.4% on an annual basis, and missed economists’ expectations of 3.2%. Interestingly, higher imports of agricultural products such as corn and edible oil counterbalanced declining imports of iron ore.

October trade balance

Higher exports and unchanged imports led to the trade surplus increasing to $31.99 billion compared to the previous reading of $27.67 billion and the $27.15 billion expected. This is the highest trade surplus recorded since January of 2009.

Consumer Price Index (October 2012)

China’s main gauge of inflation, the Consumer Price Index fell in October to 1.7% on an annual basis, the lowest reading seen in 33 months. The reading was down from 2% in August and 1.9% in September. The main reason for the fall was apparently food prices, which showed a lower trend.

The declining trend in inflation is an encouraging sign for the economy, as it strengthens policymakers’ hands in the pursuit of growth by lowering the interest rate regime, or other monetary easing or incentive measures.

Controlled inflation probably led to the People’s Bank of China pumping in a record amount of cash flow during the week ended November 1. Using repo operations the bank injected 379 billion Yuan as additional liquidity, an all-time weekly high, into the economy.

Producer Price Index (October 2012)

Chinese inflation at the wholesale level is measured by the Producer Price index. For October the PPI showed a fall of 2.8% on an annual basis compared to 3.6% in September. This was the eighth consecutive month for a decline in the PPI. However, since the rate of decline appears to be slowing, analysts are of the view that the economy may now be stabilizing. A declining wholesale inflation is also positive for the economy.

Fixed Assets Investment (October 2012)

Chinese fixed asset investment climbed 20.7% year-on-year to 29.25 trillion Yuan (about US$4.6 trillion). This was better than analysts’ expectations of 20.6% and the previous reading of 20.5%. The rising investment trend is a plus point for the economy

Industrial Production (October 2012)

After printing 8.9% in August, and 9.2% in September, the Chinese economy reported a heartening industrial production reading in October of 9.6% growth, beating expectations of 9.4%. This is likely evidence that the economy may have bottomed out after the downward trend seen over the last three years.

Retail Sales (October 2012)

In another encouraging sign of strength in the domestic economy, Chinese retail sales during October increased 14.5% compared to the same period last year, to 1.89 trillion Yuan and was the highest seen since March. Interestingly, the growth was more or less even between the urban and rural sectors – urban consumption rose 14.5% whereas the ruler population consumed 14.8% higher.

China Central Bank Outlook

The Chinese central bank reviewed the economy at its third-quarter monetary policy meeting and said, “Current economic and financial operations have shown signs of stabilizing and consumer prices are basically stable.” The statement of the bank also said it would continue to use monetary means for growing credit in the economy at a reasonable pace, and in line with objectives of social financing. However, it expressed concern over the likely import of inflation due to the massive monetary easing measures in the US and European economies. In sum the bank said, “We will continue to implement the prudent monetary policy, make it more targeted, flexible and forward-looking, while fine-tuning it according to the economic situation development.”

China – What to Expect

Looking at the above data trend, it does appear that the Chinese economy may be turning around, slowly, just like a huge tanker that takes a while to change course in the other direction. Rising exports, manufacturing and retail spending in an environment of relatively flat inflation and a dovish central bank stance lead us to the hopeful conclusion that China may yet return to its normal growth levels and lend a hand supporting global growth.