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Rebound slows as manufacturing sputters The surveys suggest that China’s economic recovery slowed in July as the one-off boost from reopening faded. It is consistent with our view that activity will remain below trend in the coming quarters. The official …
1st August 2022
Even weaker than meets the eye The statistics bureau claim that output in Q2 was slightly higher than a year ago. That’s implausible even accounting for the strong rebound shown on the monthly data for June. The official GDP data acknowledge that the …
15th July 2022
Imports slump, exports jump Import volumes fell to a three-year low last month, pointing to continued weakness in China’s construction sector. Exports rebounded strongly as shipping bottlenecks eased. But we think this may be the last hurrah for China’s …
13th July 2022
Credit growth is only creeping higher A further slight pick-up in credit growth last month was given a big helping hand from government bond issuance as local governments were instructed to issue their annual allocation of bonds by the end of June. That …
11th July 2022
Output jumps but demand growth still subdued The Caixin manufacturing PMI hit a 13-month high in June and points to a jump in output as virus restrictions were lifted and supply chain conditions improved. But it still points to subdued demand growth and …
1st July 2022
Robust services rebound amid easing restrictions The official PMIs point to a surprisingly rapid recovery in services activity this month after virus restrictions were mostly lifted. But this likely reflects a one-off boost from reopening and we doubt …
30th June 2022
Industrial recovery well advanced, consumers still weak The May data suggest that a post-lockdown recovery got underway across most parts of the economy last month. It is likely to have progressed further in June. But the recent resurgence in infections …
15th June 2022
Credit growth stronger as government borrowing picks up Credit growth was stronger than expected last month. It is likely to accelerate following the clear signal in late May that policymakers want banks to step up lending. More policy easing is likely. …
10th June 2022
No sign of upstream price pressures Consumer price inflation was unchanged last month and remains well below the government’s target of 3%, while producer price inflation dropped to its lowest in a year. As such, inflation is unlikely to be a constraint …
Rebound in exports an exception rather than the rule Export and import y/y growth picked up last month. In volume terms, exports rebounded while imports were largely unchanged. We think outbound shipments will soften again before long amid growing …
9th June 2022
Industrial activity improves but recovery will be slow The Caixin manufacturing index published today rebounded last month thanks to the easing of virus containment measures. Taken together with the official survey, they suggest that a recovery in …
1st June 2022
Past the worst but weakness persists The official PMIs add to broader evidence that activity has started to rebound as containment measures were rolled back. That said, the recovery is likely to remain tepid amid weak external demand and labour market …
31st May 2022
A cyclical trough The April data were even weaker than expected and are consistent with a sharp contraction in economic activity. Provided that the virus situation continues to improve, the economy should begin to rebound this month. But the recovery is …
16th May 2022
Lockdowns held back credit growth Lending was much weaker than expected last month as lockdowns weighed on credit demand. This should nudge the PBOC to announce further easing measures soon. But the central bank continues to signal a relatively restrained …
13th May 2022
CPI inflation ticks up but factory gate inflation eases Consumer prices rose at a faster pace last month. But inflation remains relatively subdued and there are already signs in the producer price data of upstream price pressures easing. As such, …
11th May 2022
Exporters have a bigger problem than lockdowns Goods trade softened further last month. Virus disruptions continued to take a toll but the main headwind to exports is weakening foreign demand. The pace of export growth slowed sharply from +14.7% y/y in …
9th May 2022
Growing headwinds spells modest recovery despite easing virus outbreak Hong Kong’s GDP contracted in the first quarter of the year, and although there are signs that activity is rebounding, we expect the recovery to prove weak. While virus containment …
3rd May 2022
Worse is still to come Official GDP growth beat expectations last quarter but it still slowed in q/q terms. In practice, the figures probably understate the slowdown. And growth looks set to be even weaker in Q2 given the mounting disruption from the …
18th April 2022
Demand not supply is mostly to blame for pullback Goods trade dropped back sharply last month. While disruptions from the latest COVID-19 outbreak are partly to blame, shifts on the demand-side played a bigger role. Export growth decelerated from +16.3% …
13th April 2022
Credit growth rebounds to an eight-month high Broad credit growth was much stronger than expected last month amid increased policy support. With more easing on the horizon, we expect a further acceleration although a sharp pick-up in lending still seems …
11th April 2022
Inflation climbs amid higher commodity prices Factory gate inflation picked up last month, though this was masked in the headline figures by base effects. Consumer prices continued to rise as well. Although the price of some goods will stay high in the …
Largest hit to industrial activity in two years The Caixin manufacturing index published today fell under 50 last month as measures to contain the latest virus outbreak weighed heavily on industry and, taken together with the official survey published …
1st April 2022
The biggest hit since Wuhan The surveys add to growing evidence of a large blow to service sector activity amid the latest virus surge. The hit to industry looks to have been much more modest. But even so, the economy is in the midst of its most abrupt …
31st March 2022
Stronger-than-expected start to 2022 Activity data for the first two months of the year was stronger than anticipated, which probably explains why the People’s Bank (PBOC) unexpectedly kept its policy rates on hold today. But the economy looks set to come …
15th March 2022
Credit growth disappoints Broad credit growth was much weaker than expected last month, reversing much of the acceleration of the past few months. This suggests that more easing measures will be needed to meet the policy objectives that were recently laid …
11th March 2022
Inflation ticks up amid global commodity price shock Chinese inflation picked up last month, though this was masked in the headline figures by base effects. With commodity prices soaring in response to the war in Ukraine, inflation will rise further in …
9th March 2022
Trade surplus won’t stay at record levels for long Trade volumes remained strong last month but are likely to soften over the coming quarters as China’s import-intensive construction sector cools further and rising inflation dampens demand for consumer …
7th March 2022
Another lacklustre showing The surveys suggest that the pace of economic growth edged up slightly in February. But it remains weak amid continued supply shortages, higher imported inflation, and persistent disruption to services activity. After declining …
1st March 2022
Inflation still not a concern in China Chinese inflation continued to drop back last month. Although there are some signs of supply disruption, we think these will be temporary. Factory-gate inflation should moderate further while consumer price inflation …
16th February 2022
Credit growth hits 6-month high Broad credit growth accelerated for the third consecutive month in January as policy support continued to feed through. With more easing on the horizon we expect this trend to continue for a while. But a sharp pick-up in …
10th February 2022
Economy struggling at the start of 2022 The latest surveys suggest that the pace of economic growth slowed in January due to a combination of weaker foreign demand, cooling property activity and efforts to contain recent outbreaks. We think momentum in …
31st January 2022
Economy likely to slip back into contraction this quarter Hong Kong’s economy barely grew in Q4 despite a rebound in goods exports. And with stricter containment measures imposed this month to contain the latest outbreak, we expect an outright contraction …
28th January 2022
Momentum weak heading into 2022 Official GDP growth beat expectations last quarter and in q/q terms was the strongest since late 2020. But we are sceptical that this reflects the reality on the ground – our China Activity Proxy suggests output was largely …
17th January 2022
Shipping disruptions a near-term risk Exports remained strong last month but may soften in the coming months amid growing disruptions at ports. Meanwhile, imports dropped back sharply, consistent with continued domestic weakness, especially in the …
14th January 2022
Rebound in credit growth underway Broad credit growth picked up again in December amid increased policy support. We think lending will continue to rebound in the coming months although officials are likely to prevent a sharp jump. Chinese banks extended a …
12th January 2022
Inflation pick-up reversing Chinese inflation dropped back last month, consistent with our view that the acceleration in price gains in earlier months would prove temporary. We think factory-gate inflation will continue to moderate going forward and that …
Economic headwinds continue into 2022 The latest surveys suggest that the pace of industrial growth picked up by more than expected last month. This was largely thanks to improving supply chain conditions and lower raw material prices. Meanwhile, services …
4th January 2022
Virus disruptions and property downturn continue to hold back economy Industry in China continued to rebound last month from disruptions caused by power shortages while the recovery in services activity was held back by renewed virus outbreaks. A new …
15th December 2021
A turn in the credit cycle Broad credit growth edged up for the first time in nine months in November. Given increased policy support we think the recent slowdown in lending has come to an end. But we think officials will seek to avoid a sharp rebound in …
9th December 2021
Food aside, price pressures are easing Consumer price inflation rose above 2% for the first time in over a year last month. But this was almost entirely due to food prices. Core inflation remains subdued and producer prices have levelled off. CPI rose …
Shipments strengthen but Omicron injects uncertainty Exports and imports beat expectations last month thanks to stronger demand and easing semiconductor shortages. In the near-term, the emergence of the Omicron variant is likely to support demand for …
7th December 2021
Industry improves but rebound likely to prove temporary The Caixin manufacturing index published today slipped under 50 last month on the back of softer domestic demand. This contrasts with the official survey released yesterday. Taken together, the …
1st December 2021
Easing power shortages provide temporary boost to industry The official PMIs suggest that industrial activity rebounded this month thanks to easing disruptions from power shortages while a renewed virus flare-up held back the recovery in services. And …
30th November 2021
Disruption in industry eases as energy shortages dissipate Industrial growth rebounded last month as energy shortages eased. But this pick-up is likely to be short-lived given the deepening downturn in property construction. And while retail sales also …
15th November 2021
Slowdown in credit growth may be over Broad credit growth levelled off in October having previously decelerated to its slowest pace since December 2005. There are some signs that PBOC policy is turning more supportive in response to strains in the …
10th November 2021
Factory gate inflation reaches another high Producer price inflation continued to surge and reached a new high last month. But this largely reflects temporary disruption in a handful of industries from energy shortages, which are already easing. There are …
Strength in exports persists but will reverse before long Exports continued to soar last month while imports took another leg down despite directives to raise coal supply amid power rationing. As a result, the trade surplus reached its highest level since …
8th November 2021
City narrowly avoids another recession Hong Kong’s economy largely treaded water last quarter, with weaker exports and investment meaning the rebound from Q2’s downturn was much more tepid than expected. The pace of recovery is likely to remain muted in …
1st November 2021
Supply disruptions still weighing on industry The manufacturing PMIs diverged again this month. But the big picture is that power rationing and supply shortages continued to constrain output and push up prices. The Caixin manufacturing PMI continued to …
China’s rebound falters In q/q terms, official GDP growth slowed to a crawl last quarter. And our China Activity Proxy points to a sharp contraction. Although some of the recent weakness in services is now reversing, industry and construction appear on …
18th October 2021