China: April activity data preview - ING

Tim Condon, Chief Economist at ING, suggests that increased global financial market volatility emanating from China is a threat to the mild risk-on investor sentiment that they believe has prevailed since mid-February.

Key Quotes

“April industrial production, fixed asset investment, retail sales and housing sector data are due tomorrow. The dip in the manufacturing PMIs informs the consensus forecast of slower IP growth, 6.5% YoY vs. 6.8% in March. The forecast for fixed asset investment is 11.0% YoY YTD, up from 10.7% in March. The forecast for retail sales is 10.6%, up from 10.5% in March.

There is no consensus forecast available for housing data. Based on press reports of cooling measures in the overheating lower tier cities we expect a slowdown in sales growth after their 1Q16 bounce.

The “authoritative voice” tells us that policy shifted in April to supply side structural reform from demand side stimulus. Policy shifts can make the economic data noisy. Increased global financial market volatility emanating from China is a threat to the mild risk-on investor sentiment that we believe has prevailed since mid-February.

The US import price index for imports from China contracted 1.9% YoY in April. The deepening of China-origin import price deflation that started last year – deflation was zero in 2014 – continues in 2016 (year-to-date -1.8%).

Supply side structural reforms will take out some of China’s excess manufacturing capacity and the rest of the world will have to grow into the rest, which is going to prolong the slump in global manufacturing, in our view.”