China: Economic data releases disappoint - MUFG

Lee Hardman, Currency Analyst at MUFG, suggests that the recent rebound in the US dollar especially against commodity related and emerging market currencies has derived support as well from the dampening of optimism from earlier this year that policy stimulus in China would provide more support for economic growth.

Key Quotes

“The release of disappointing industrial production, fixed asset investment, and retail sales reports for April will further dampen more optimistic expectations. Most notably the annual rate of retail sales growth continued to slow for the third consecutive month moving it back to within touching distance of the cyclical low from April of last year.

The releases will heighten concern that economic growth in China is continuing to slow even with more aggressive policy easing in place. The latest new loans report did reveal as well that growth weakened more than expected in April following a surge in new lending in Q1. Market participants will be watching closely to see if China is becoming less willing to stimulate the economy as aggressively. The negative developments will keep downward pressure on regional currencies.”