Mixed news yesterday from our two biggest export markets – China and Japan.
The news slipped by local investors who were focused on the start of the flood of June 30 corporate results and the goings on in federal parliament and the US.
China’s retail sales, industrial production and fixed asset investment were all a bit weaker than expected in July (the start of the third quarter).
All three slowed in July after outperforming in June, according to the second big monthly dump of data from China’s National Bureau of Statistics .
Retail sales grew 10.4% year on year in July, down from June’s pace of 11% and market forecasts of 10.8%.
Urban fixed-asset investment rose 8.3% year on year in the first seven months of 2017, short of June’ and May’s pace of 8.6% seen during the previous two months.
China’s factory output grew 6.4% in July from a year earlier, down sharply from the 7.6% rate reported for June.
China’s steel output however hit a monthly record in July of 74.02 million tonnes, up 10.3% on a year ago. July’s figure was ahead of the previous monthly record of 73.23 million tonnes set in June. The Statistics Bureau reported.
In the first seven months of the year, steel output totalled 491.55 million tonnes, up 5.1%, according to the National Statistics Bureau and will easily top 800 million tonnes and a bit more.
Real estate investment in China was up 7.9% in January-July period from the same period a year earlier, and slower than the 8.5% growth in the June half year.
New construction starts measured by floor area were up 8% in January-July, compared with a 10.6% rise in the first six months of the year
Property sales measured by floor area grew 14% in January-July from the same period a year earlier, down from 16.1% in the first six months of the year.
That suggests the property sector cooled a bit in July, perhaps thanks to government moves to take speculative heat out of some big city markets. The house price data from the country’s 70 biggest cities for July on Friday may help that view.
In contrast to slowing China, Japan’s economy grew in the second quarter at the fastest pace in more than two years – an annualised 4% from the second quarter of 2016 according to the latest estimate from the government.
Quarter on quarter growth was estimated at a solid 1%, from the 0.4% seen in the March quarter (which was revised up from the first estimate of 0.3%) against forecasts for 0.6%. The annualised estimate was 2.5%, so there has been a considerable outperformance.
That’s thanks to stronger than consumer spending and capital investment (which both rose at the fastest rates in more than three years thanks to stronger domestic demand). Private consumption, which accounts for about two-thirds of GDP, rose 0.9% 9that was responsible for 0.5% of growth in the quarter) from the previous quarter, more than the median estimate of 0.5%. That was the fastestgrowth rate in consumer spending in more than three years.
That means the economy has now grown by six straight quarters to April-June. Reuters said that the last time the Japanese economy had a run of six consecutive quarters of growth was the March quarter of 2005 through to the three months to June, 2006.
Driving all this is the very expansive monetary policy with its negative interest rates from the Bank of Japan, helped by some extra loosening of fiscal policy by the Abe Government.
Despite this the economy is still a long way from reaching the 2.0% inflation rate (it was first estimated to be reached three years ago and has fallen short ever since, despite two more rounds of quantitative easing, including the radical move to negative interest rates)).
The Bank of Japan expects this growth to continue into 2018.
Capital spending grew by 2.4% in the quarter, double the 1.2% estimate from the markets. That was the fastest growth in business investment since the March quarter of 2014.
External demand (net exports) subtracted 0.3 percentage point from GDP growth in April-June in part due to an increase in imports. This is notable because Japan usually relies on exports to drive growth. Exports fell 0.5% (quarter on quarter, compared with the 1.9% jump in the March quarter. Growth in government consumption was up 0.3%, recovering from the fall of 0.1% in the previous period.
