Daily Insight
Group Economics Macro & Financial Markets Research
20 January 2016
China’s slowdown remains gradual Arjen van Dijkhuizen Senior Economist Tel: +31 20 628 8052 arjen.van.dijkhuizen @nl.abnamro.com
China’s economic growth falls to 6.9% in 2015, from 7.3% in 2014
Latest activity data confirm economic transition is in motion
Germany’s ZEW sentiment falls on worries about China
Aline Schuiling Senior Economist Tel: +31 20 343 5606
China’s economic growth dropped from 7.3% in 2014 to 6.9% in 2015
aline.schuiling @nl.abnamro.com
Economic growth slowed to 6.8% yoy in 2015Q4, down from 6.9% in Q3 and 7.0% in the first two quarters. As a result, full-year annual growth fell to 6.9% last year, close to our 7.0% forecast and the official target, and down from 7.3% in 2014. These data are in line with our base case scenario of an ongoing gradual slowdown of the Chinese economy, despite the occasional flaring up of hard landing fears. Growth in the secondary sector slowed from 7.3% in 2014 to 6.0% in 2015, whereas growth in the tertiary sector accelerated from 7.8% to 8.3%. While the discussion on the quality of China’s GDP data will likely continue and some alternative measures point to substantially lower growth rates, Bloomberg’s alternative GDP estimate is currently at 6.7%, not far below the official number. For more information we refer to our China Watch, Chinaphobia overdone, published on Tuesday 19 January.
Bloomberg GDP estimate still close to official forecast % yoy
13 11 9
7 5 08
09
10
11
Real GDP growth (official)
12
13
14
15
16
Bloomberg GDP estimate
Source: Thomson Reuters Datastream
Latest data confirm that economic transition is in motion After the monthly activity data had surprised on the upside in November, the December data came in a bit weaker than expected. Growth of industrial production fell back to 5.9% yoy (consensus: 6.0%), after having risen to 6.2% in November. Retail sales cooled
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Daily Insight – Adjusting our GDP growth forecasts– 19 January 2016
marginally, from 11.2% to 11.1% yoy (consensus: 11.3%), the first drop in five months. Fixed investment resumed its gradual slide, dropping to 10% yoy (consensus and November number: 10.2%). Fixed investment has cooled significantly in 2015, particularly in the first months of last year, while industrial production has also cooled compared to 2014. Growth of retail sales is also trending down over the longer term, but it has held up much better last year. All in all, the latest activity data are also pointing at an ongoing gradual slowdown and confirm the ongoing transition of China’s economy.
December activity data slightly weaker than expected % yoy
30 25 20 15 10 5 11
12
13
Industrial production
14
15
Fixed investment
16
Retail sales
Source: Thomson Reuters Datastream
Despite gradual slowdown, China’s transition will remain bumpy We expect China’s gradual slowdown to continue in the coming years, with economic growth dropping from 6.9% in 2015 to 6.5% in 2016 and 6.0% in 2017. Our base case scenario assumes that the authorities will continue to add stimulus to prevent a hard landing. We expect growth of services to continue outperforming industry, although growth of financial services will also slow compared to last year. Still, China’s transition will remain a bumpy one and we can expect occasional hiccups to continue. This reflects a wide range of risks such as data quality and policy intransparency issues, overcapacity in industry and real estate, high debt levels, risks stemming from financial liberalisation and from financial sector issues and geopolitical risks. ZEW sentiment falls on worries about China and emerging markets Germany’s ZEW economic sentiment declined to by 5.9 points to 10.2 in January, following two monthly rises at the end of last year. The index has now returned to its level of November 2015, which is well below its long-term average value of around 25. The ZEW index tends to be largely driven by sentiment on financial markets and the decline in January reflects the worries about China’s economy and emerging economies in general that has continued to hit market sentiment in the start of this year. That said, we expect the economic recovery in Germany and the eurozone at large to continue in the coming quarters, though at a rather moderate pace. The domestic economic fundamentals will support a further pick-up in domestic demand, but the headwinds from outside the eurozone will probably limit the pace of overall growth.
3
Daily Insight – Adjusting our GDP growth forecasts– 19 January 2016
Day
Date
Time
Country
Monday
18/01/2016
05:30:00
JP
Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday
19/01/2016 19/01/2016 19/01/2016 19/01/2016 19/01/2016 19/01/2016 19/01/2016 19/01/2016 19/01/2016
03:00:00 03:00:00 03:00:00 03:00:00 08:00:00 10:30:00 11:00:00 13:00:00 16:00:00
Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday
20/01/2016 20/01/2016 20/01/2016 20/01/2016 20/01/2016 20/01/2016 20/01/2016 20/01/2016 20/01/2016
10:30:00 10:30:00 14:30:00 14:30:00
Period
Latest outcome
Industrial production - % mom
Nov F
-1.0
CN CN CN CN DE GB DE TR US
Fixed investments - % yoy Retail sales - % yoy Industrial production - % yoy GDP - % yoy CPI - % yoy CPI - % yoy ZEW index (expectation economic growth) Repo rate - % NAHB home builders' confidence index
Dec Dec Dec 4Q Dec F Dec Jan Jan 19 Jan
10.2 11.2 6.2 6.9 0.3 0.1 16.1 7.5 61.0
GB GB US US US US US CA BR
Claimant count unemployment rate - % Change in claimant count - thousands Inflation excl food and energy - % mom Inflation excl food and energy - % yoy Inflation (CPI) - % mom Inflation (CPI) - % yoy Housing starts - % mom Policy rate - % Policy rate - %
Dec Dec Dec Dec Dec Dec Dec Jan 20 Jan 20
2.3 3.9 0.2 2.0 0.0 0.5 10.5 0.5 14.3
Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday
21/01/2016 21/01/2016 21/01/2016 21/01/2016 21/01/2016 21/01/2016 21/01/2017 21/01/2018 21/01/2016
06:30:00 07:30:00 08:45:00 11:00:00 13:45:00 13:45:00 14:30:00 14:30:00 14:30:00
NL NL FR EC EC EC EC EC US
Consumer confidence - index Unemployment rate - % Business confidence manuf. - index Core inflation - % yoy Refi rate - % ECB Deposit rate - % ECB QE (EUR bn per month) ECB Press Conference Philadelphia Fed - business confidence - index
Jan Dec Jan Dec F Jan Jan Jan Jan Jan
6 6.8 103 0.9 0.05 -0.30 60.00
0.9 0.05 -0.30 60.00
-5.90
-1.14
Friday Friday Friday Friday Friday Friday
22/01/2016 22/01/2016 22/01/2016 22/01/2016 22/01/2016 22/01/2016
10:00:00 10:00:00 10:00:00 10:30:00 15:45:00 16:00:00
EC EC EC GB US US
PMI manufacturing - index PMI services - index Composite PMI output Retail sales - % mom Markit - Flash PMI Existing home sales - % mom
Jan P Jan P Jan P Dec Jan P Dec
53.20 54.20 54.30 1.70 51.20 -10.53
53.00 54.20 54.20
52.50 53.80 53.80
7.96
8.00
14:30:00 14:30:00 16:00:00
Key Economic Indicators and Events
Consensus
10.2 11.3 6.0 6.9 0.3 8 7.5 61.0
3.3 0.2 2.1 0.0 0.8 2.7 0.4 14.8
ABN AMRO
6.9
3 7.5 61
0.1 2.1 0.0 0.8 3.5
7 6.8 0.9 0.05 -0.30 60.00
Source: Bloomberg, Reuters, ABN AMRO Group Economics (we provide own forecasts only for selected k ey variables and events)
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