Daily Insight
Group Economics Macro & Financial Markets Research
15 December 2015
China data to give Janet some comfort Arjen van Dijkhuizen Senior Economist Tel: +31 20 628 8052 arjen.van.dijkhuizen @nl.abnamro.com
The latest China data surprise on the upside …
… suggesting that stimulus is having an effect …
… and that our base scenario of a gradual slowdown is holding up
All this should give the Fed additional comfort to start hiking rates this week
Latest China data surprise on the upside … China's November data published last weekend point to an improvement compared to the past months and were also better than market expectations. Industrial production growth accelerated to 6.2% yoy (Oct 5.6%, market consensus 5.7%). This was the highest pace since June. Fixed asset investment was flat at 10.2% ytd yoy, in line with market expectations. This was the first time since June that investment growth did not slow. Meanwhile, retail sales growth rose further to 11.2% yoy (Oct 11.0%), slightly better than consensus (11.1%). This was the fourth monthly acceleration in a row. With the data surprising on the upside, Bloomberg’s alternative GDP estimate jumped to 6.85% yoy in November (October: 6.57%), which is getting quite close to the official growth target (and our forecast) of 7.0% for 2015.
Bloomberg’s growth indicator close to official number % yoy
13 11 9 7 5 08
09
10
11
Real GDP growth (official)
12
13
14
15
Bloomberg GDP estimate
Source: Bloomberg
… suggesting that stimulus is having an effect … While consumption remained robust in recent months despite what happened on the stock market in June/July, the latest data seem to suggest industry is stabilising. Last week,
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Daily Insight – China data to give Janet some comfort – 15 December 2015
data for imports (still clearly in contraction mode, but showing early signs of a bottoming out), inflation and lending also pointed in that direction, although exports continue to disappoint. This shows that monetary easing (amongst other policy rate and RRR cuts) and fiscal stimulus (more infrastructure spending) is having an effect. … and our base scenario of a gradual slowdown is holding up The data are in line with our scenario of an ongoing gradual slowdown of the Chinese economy, which is partly based on the assumption that the authorities will actively compensate by adding stimulus if the slowdown is going faster than what is deemed desirable. Looking forward to 2016, we expect a couple of additional policy rate cuts and around 150 bps in further RRR cuts, as well as more fiscal stimulus. Gradual CNY depreciation We also expect the authorities to allow a further depreciation of the CNY (towards 6.55 per USD end-2016). This should help re-inflate the economy and support external competitiveness, although we do not expect the authorities to tolerate too sharp a depreciation. We will look more closely at the recent depreciation of the CNY – particularly since IMF formally approved its inclusion in the SDR basket in late November – and at changes in China’s exchange rate regime (e.g. the presentation of a currency basket) in a special FX Watch released today – see here for more. Comfort for the Fed The better China data add to a stack of evidence – such as the strong US labour market reports – that should give the FOMC comfort to raise interest rates later this week. Indeed, given recent communication this looks like a done deal. However, the Fed should also communicate that the rate hike cycle will be a very gradual affair. Please see our note here that poses and answers five questions on the upcoming Fed rate hike.
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Daily Insight – China data to give Janet some comfort – 15 December 2015
Day
Date
Time
Country
Saturday Saturday Saturday
12/12/2015 12/12/2015 12/12/2015
06:30:00 06:30:00 06:30:00
CN CN CN
Monday Monday Monday Monday Monday Monday
14/12/2015 14/12/2015 14/12/2015 14/12/2015 14/12/2015 14/12/2015
00:50:00 05:30:00 07:30:00 11:00:00 13:00:00 15:45:00
Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday
15/12/2015 15/12/2015 15/12/2015 15/12/2015 15/12/2015 15/12/2015 15/12/2015 15/12/2015 15/12/2015 15/12/2015
Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday
Key Economic Indicators and Events
Period
Latest outcome
Consensus
Retail sales - % yoy Industrial production - % yoy Fixed asset investment - % yoy
Nov Nov Nov
11.2 6.2 10.2
11.1 5.7 10.1
JP JP IN EC IN EC
Tankan business conditions large enterprises Industrial production - % mom Wholesale price index - % yoy Industrial production - % mom CPI - % yoy ECB announces weekly QE details
4Q Oct F Nov Oct Nov
12.0 1.4 -2.0 0.6 5.4
11.0
09:30:00 10:30:00 11:00:00 14:00:00 14:30:00 14:30:00 14:30:00 14:30:00 14:30:00 16:00:00
SE GB DE HU US US US US US US
Policy rate - % CPI - % yoy ZEW index (expectation economic growth) Base rate -% Empire State PMI - Manuf. general business conditions - index Inflation excl food and energy - % mom Inflation excl food and energy - % yoy Inflation (CPI) - % mom Inflation (CPI) - % yoy NAHB home builders' confidence index
Dec 15 Nov Dec Dec 15 Dec Nov Nov Nov Nov Dec
0 -0.1 10.4 1.4 -10.74 0.2 1.9 0.2 0.2 62
0 0.1 15.4 1.4 -6.68 0.2 2.0 0.0 0.5 63
16/12/2015 16/12/2015 16/12/2015 16/12/2015 16/12/2015 16/12/2015 16/12/2015 16/12/2015 16/12/2015 16/12/2015 16/12/2015 16/12/2015
10:00:00 10:00:00 10:00:00 10:30:00 10:30:00 11:00:00 13:00:00 14:30:00 15:15:00 15:45:00 20:00:00 20:30:00
EC EC EC GB GB EC CZ US US US US US
PMI manufacturing - index PMI services - index Composite PMI output Claimant count unemployment rate - % Change in claimant count - thousands Core inflation - % yoy Repo rate - % Housing starts - % mom Industrial production - % mom Markit - Flash PMI Policy rate - % FOMC statement and press conference
Dec P Dec P Dec P Nov Nov Nov F Dec 16 Nov Nov Dec P Dec 16 Dec 16
52.8 54.2 54.2 2.3 3.3 0.9 0.05 -11.0 -0.2 52.8 0.25
52.7 54.1 54.1 2.3 2.5 0.9 0.05 8.0 -0.2
0.05 9.0 -0.2
0.5
0.5
Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday
17/12/2015 17/12/2015 17/12/2015 17/12/2015 17/12/2015 17/12/2015 17/12/2015 17/12/2015
00:50:00 07:30:00 10:00:00 10:00:00 10:30:00 14:30:00 14:30:00 20:00:00
JP NL DE NO GB US US MX
Merchandise trade exports - % yoy Unemployment rate Ifo - business climate - index Policy rate - % Retail sales - % mom Initial jobless claims - thousands Philadelphia Fed - business confidence - index Policy rate - %
Nov Noc Dec Dec 17 Nov Dec 12 Dec Dec 17
-2.20 6.9 109.0 0.75 -0.6 282 1.9 3.0
-1.60
Friday Friday
18/12/2015 18/12/2015
06:30:00
NL JP
Consumer confidence - index Policy rate - %
Dec Dec 18
9 80.0
-2.6 0.2 5.3
108.9 0.58 0.7
ABN AMRO
0.1
0.1 10.0
0.2 1.9 0.0 0.5 63 52.1 53.9 53.8
6.9 108.4 0.75
1.0 3.1 9
Source: Bloomberg, Reuters, ABN AMRO Group Economics (we provide own forecasts only for selected k ey variables and events)
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