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11 Mar 2015
China data reinforces loose policy – MP
FXStreet (Barcelona) - With Chinese industrial production and retail sales numbers posting a sharp drop, Dean Popplewell, Director of Currency Analysis at MarketPulse, assesses that the economy is slowing down, which indicates that the previous rate cut might be the beginning of a new cut cycle.
Key Quotes
“Investors have mostly been preoccupied with Europe at the moment. Soon they will have to begin focusing on China with a bit more urgency as data there continues to reveal that the world’s second largest economy is slowing down.”
“In the overnight session, industrial production growth fell sharply to +6.8% in January and February, down from +7.9% in December, and well below market consensus (+7.7%).”
“Retail sales growth slowed too, to +10.7% from +11.9% in December.”
“The softer reports would suggest that China’s economy is still losing and needs further policy support in the form of interest cuts and other monetary policy loosening.”
“The PBoC has singled out the rise of “real” interest rates on the back of cooling inflation as a further drag on the economy, especially as many companies are struggling with heavy debt levels and end-user demand remains weak.”
“The last rate cut, a few weeks ago, did take the market by surprise, but they were not flat footed. Nevertheless, investors did pose the question was this the beginning of a new rate cycle cut? Present data would indicate the strong possibility.”
Key Quotes
“Investors have mostly been preoccupied with Europe at the moment. Soon they will have to begin focusing on China with a bit more urgency as data there continues to reveal that the world’s second largest economy is slowing down.”
“In the overnight session, industrial production growth fell sharply to +6.8% in January and February, down from +7.9% in December, and well below market consensus (+7.7%).”
“Retail sales growth slowed too, to +10.7% from +11.9% in December.”
“The softer reports would suggest that China’s economy is still losing and needs further policy support in the form of interest cuts and other monetary policy loosening.”
“The PBoC has singled out the rise of “real” interest rates on the back of cooling inflation as a further drag on the economy, especially as many companies are struggling with heavy debt levels and end-user demand remains weak.”
“The last rate cut, a few weeks ago, did take the market by surprise, but they were not flat footed. Nevertheless, investors did pose the question was this the beginning of a new rate cycle cut? Present data would indicate the strong possibility.”