China: A mixed batch of activity data in August – Nomura

China’s August macro data sent mixed signals to markets as industrial production (IP) and retail sales growth rose slightly to 6.1% and 9.0% y-o-y, respectively, in August, while fixed asset investment (FAI) growth was down slightly to 5.3% y-o-y ytd in August from 5.5% in July, explains the research team at Nomura.

Key Quotes

“Property investment growth slowed to 9.3% y-o-y in August from 13.2% in July. Despite the rebound of IP and retails sales growth, we believe China’s overall economy continues to slow, and this could worsen in coming months.”

“Although Beijing appears determined to unwind its deleveraging efforts and start a new round of policy easing, we think there is much less room for policy stimulus than during previous easing cycles.”

“Export growth could decline sharply in coming months due to a possible escalation of US-China trade tensions, the fallout of some EM economies and the end of front-loading.”

“We expect more policy easing measures in coming months, such as leaving rates unchanged amid expected Fed rate hikes in late September and a RRR cut before year-end.”