Chinese economic data just missed across the board

DAVID SCUTT 

AUG 14, 2017, 12:12 PM

Photo: Feature China/ Barcroft Images/ Barcroft Media via Getty Images.

Chinese economic data released today has missed across the board with retail sales, industrial output and urban fixed asset investment growth all undershooting expectations by a significant margin.

According to China’s National Bureau of Statistics (NBS), retail sales grew by 10.4% in the year to July, a figure that was below both the 11% pace seen in June and forecasts for a smaller deceleration to 10.8%.

It was also the slowest year-on-year increase since the first two months of 2017.

The NBS said sales of cosmetics, home appliances, office supplies, furniture and building materials all grew faster than total retail sales over the past 12 months, while those for garments, jewelry, personal care, telecommunications and oil products all came in below the 10.4% average.

Mirroring the underwhelming retail result, industrial output and urban fixed asset investment also painted a disappointing picture on the industrial sectors within the Chinese economy.

The NBS said that industrial output grew by 6.4% in the 12 months to July, a significant miss on the 7.2% increase expected. The figure was also well below the 7.6% pace reported in the year to June.

Over the year, output of cement, cars and crude oil all fell, partially offsetting strong growth in crude steel, natural gas and electricity production.

Of note to iron ore producers, the NBS said that crude steel output jumped by 10.3% year-on-year, leaving total output during the month at 74.02 million tonne, the highest level on record.

Perhaps reflecting that surge, power output rose by 8.6% year-on-year to 604.7 billion kilowatt hours, the fastest increase since May 2014. Coal output grew 8.5% year-on-year to 294 million tonnes, although that was down 4.5% on June leaving total production at the lowest level since October 2016.

Urban fixed asset investment also weakened compared to the same period last year, growing 8.3% between January and July 2017. Markets had been expecting an increase of 8.6% year-on-year, unchanged from the first six months of the year.

Public-sector investment grew by 11.7% between January to July compared to a year earlier, down from 12% in the first six months of the year. Private sector investment — accounting for around 60% of total investment — grew by a smaller 6.9% over the same period, down from 7.2% between January to June.

Partially explaining the weakness in the headline figure, the NBS said property investment grew by 7.9% over the year compared to the same period in 2016, down from the 8.5% increase recorded in the first six months of the year.

New construction starts grew by 8% year-on-year between January to July, down from the 10.6% level in the first half of the year.

Sales grew by 14% year-on-year year-to-date, down from 16.1% growth between January to June this year. In year-on-year terms, sales by floor area grew by just 2.0%, the weakest increase since December 2015.

A spokesperson from the NBS said China’s overheated property market had “cooled somewhat”, according to Thomson Reuters, noting that investment-driven property purchases had been “effectively controlled”.

Despite the trio of data misses, there has been negligible reaction across financial markets, continuing the theme seen over the past few years.

NOW WATCH: Money & Markets videos

Business Insider Emails & Alerts

MORGAN STANLEY: The euro will be worth more than the pound by next year

• Will Martin
 

• Aug. 13, 2017, 3:07 AM
• 2,199
 

Tourist binoculars offer users the chance to pay in Pounds or Euros in the British overseas territory of Gibraltar, historically claimed by Spain, April 20, 2017. Reuters/Phil Noble

• Morgan Stanley says Sterling will sink below €1 by next year.
• Surging Eurozone economy will buoy currency.
• Brexit uncertainty to weaken pound.

LONDON — The euro will be worth more than Britain's currency by the end of the first quarter of 2018, analysts from Morgan Stanley said in a client note circulated on Friday.

In the bank's latest FX Overview paper, a team led by strategist Hans W. Redeker argue that a combination of a stronger euro and a weakening pound will combine to make the euro more valuable than the pound for the first time in its history, and make it — in terms of pure value — the strongest major currency on the planet.

The euro has been on a huge tear during 2017, particularly against the dollar, as investors take note of the improving fortunes of the bloc's economy, which has seen growth recover to its best levels since the eurozone debt crisis.

It will continue to strengthen and will move "beyond parity" with the pound during the first three months of the year, hitting a peak of £1.02 before weakening a little as the year progresses, the team's latest forecasts suggest.

By the end of 2018, €1 will be worth £0.91.

On the one hand, Morgan Stanley argues, the euro's historic move beyond parity with the pound will be driven by continually increasing confidence in the eurozone economy, which will prompt major currency buyers to add a greater allocation of the euro to their portfolios.

"We expect EUR to stay strong as pension funds and insurance companies (such as those in Switzerland and Japan) start to increase their net EUR currency exposure from historically low levels," the team writes.

However, what will also drive the move is the weakness currently apparent in the British economy and the uncertainty surrounding Brexit negotiations, both of which will drive down the value of the pound.

"GBP is likely to weaken in its own right, driven by weak economic performance, low real yields and increasing political risks," the team writes.

"Last year, the British economy maintained its growth momentum even after the Brexit vote, but the structure of growth has changed. The household sector has increased spending, primarily funded by unsecured lending, which is unsustainable (Exhibit 11).

"A consolidation of the household balance sheet, coupled with negative real wage growth, may reduce consumption, which has been propping up growth so far (Exhibit 12). Brexit uncertainty may also weigh on business investment, which will weaken the already lackluster productivity growth outlook, suggesting real rates staying low."

Here are both exhibit's mentioned by the researchers:

Morgan Stanley

NOW WATCH: JULIA CORONADO: Bonds and stocks disagree — 'the bond market is, dare I say it, smarter'

00:00

01:31

More: Pound Pound Euro Sterling

The creator of 'Angry Birds' is set to go public with a value of $2 billion

• Business Insider Nordic

• 5h
• 645

A still from "The Angry Birds Movie." Sony

• Rovio Entertainment Oy is the Finnish game studio that created the mobile game megahit 'Angry Birds,' and subsequent movies.
• Anonymous sources told Bloomberg that Rovio is planning an IPO, with an estimated value of $2 billion.
• Carnegie Bank A/S, Danske Bank A/S and Deutsche Bank AG are among banks advising on a potential listing, the people said.

Bloomberg News' sources indicate that Rovio’s IPO could take place as soon as next month. The Espoo, Finland-based company is seeking to raise some $400 million (£308 million) through public markets, at an estimated valuation of $2 billion (£1.5 billion). However, the same sources say that a final decision is pending.

Rovio posted €190 million (£172 million) in revenues in 2016, up 34% on the previous year. Earnings before interests and taxes amounted to €17.5 million (£15.9 million). The turnaround from previous years' losses was fuelled by "The Angry Birds Movie," which has helped boost game revenues.

The Finnish game maker has been looking for new growth sources after recent years' losses. This March, Rovio sold off its Vancouver-based animation arm to Kaiken, an upstart founded by Rovio's previous CEO Mikael Hed.

Rovio's biggest owner is cofounder Niklas Hedman's uncle Kaj Hed, who owns some 70% of the company. 

Read the original article on Business Insider Nordic. Copyright 2017. Follow Business Insider Nordic on Twitter.

NOW WATCH: The biggest mistake everyone makes when eating steak, according to Andrew Zimmern

00:00

01:33

More: Business Insider Nordic Angry Birds Rovio