3 Numbers To Watch: Chinese Output, Investments And Retail Sales

It should be a quiet day, with focus largely shifting to next week’s data from Europe and the US. The day will therefore be dominated by Chinese data on the real economy in July. After the shock in China's interbank markets in June and the declining PMI-indices, many commentators have been worried about the sustainability of the recent pickup in European and American monthly data in the face of slower Chinese growth. In response to the weakness, the Chinese government announced a small stimulus package in July, with the intent of meeting its targeted annual 7.5 percent gross domestic growth rate.

Market anxiety has now been alleviated by the recent improvement both in the PMI and the trade data, as The Wall Street Journal, Fredrik Oqvist and Ole Hansen’s two charts on iron ore and oil trade patterns showed. Today’s numbers should confirm that the Chinese economy is doing pretty well, albeit at a slower rate than what many have become accustomed to. The market seems to have factored the slower growth outlook into prices, so there is now room for at least a slight positive surprise. The Chinese consumer- and producer price indices for July were published already earlier during the night.



Additionally, in Japan the central bank’s monthly report and the July’s consumer confidence numbers will be released at 05:00 GMT. With the real economy numbers weak in June, but sentiment numbers promising better in July, the Japanese economy's response to Abenomics is a development worth following. In Europe, the European Central Bank announces the latest 3-year longer-term refinancing operation (LTRO) repayment numbers at 10:00 GMT. There will also be less-important data from Europe: France’s industrial production and trade balance numbers from both Italy and UK.

China July Industrial Output (05:30 GMT): A growth of nine percent is expected, slightly higher than the 8.9 percent growth in June.

China July Fixed Asset Investments (05:30 GMT): is expected to have risen by 20 percent from year ago, after June’s 20.1 percent growth rate. This would be the fifth straight month of falling growth rates. Since 2003, the fixed asset investment annual growth rate has varied between 25 and 30 percent, but during the past twelve months has remained around twenty percent. With an intentional shift from overinvestment to more balanced economy, the fall in the growth rate is not worrisome, and should be seen as a normalisation of the economy. Of course, a happy ending would require other sectors to increase its demand, namely consumers.

China July Retail Sales (05:30 GMT): The consensus forecast sees an increase of 13.5 percent, slightly higher than the 13.3 percent recorded in June. Note that the rate has increased for the past five months, picking up the slack from the lower rate of fixed asset investments.