China Economy Expands by 0.8% in Q2 Versus a 0.5% Forecast

Highlights

• It was a testy morning for the Asian markets, with economic indicators from China drawing early interest.
• The Chinese economy expanded by 0.8% in Q2 versus the forecasted growth of 0.5%. Other economic indicators were also upbeat.
• Later today, economic indicators from the US should have a limited impact on market risk sentiment.

It was a busy start to the week on the Asian economic calendar, with the Chinese economy in the spotlight. The markets were jittery ahead of the economic indicators from China, with trade and inflation numbers from China disappointing last week.

GDP numbers for the second quarter and industrial production, retail sales, and fixed asset investment figures for June were in focus this morning. The numbers were better than expected despite the weak global demand environment.

The Chinese economy expanded by 0.8% in the second quarter and by 6.3% year-over-year. Economists forecast the Chinese economy to grow by 7.3% year-over-year but by just 0.5% in the second quarter.

Industrial production and fixed asset investment numbers were hotter than expected. Industrial production increased by 4.4% year-over-year in June versus 3.5% in May. Fixed asset investments were up 3.8% in June versus 4.0% in May. Economists forecast industrial production and fixed asset investment to increase by 2.7% and 3.5%, respectively.

However, retail sales numbers disappointed, rising by 3.1% in June versus a forecasted 3.2% increase. In May, retail sales were up 12.7% year-over-year.

The better-than-expected GDP and industrial production numbers will provide market relief. Before today’s figures, recent economic indicators had painted a gloomier picture, calling on Beijing to deliver a significant stimulus package to support the ailing economy.

AUD/USD Reaction to China Economy Numbers

Ahead of the economic indicators from China, the AUD/USD rose to an early high of $0.68456 before falling to a pre-stat low of $0.68171.

However, in response to the economic indicators, the Aussie Dollar fell to a post-stat low of $0.68115 before rising to a high of $0.68241.

This morning, the AUD/USD was down 0.20% to $0.68238.

Up Next

It is a quiet day on the economic calendar. Finalized inflation numbers from Italy will be in focus ahead of the US session. We do not expect the figures to influence market risk sentiment

However, investors should consider ECB chatter. ECB President Christine Lagarde and Chief Economist Philip Lane are on the calendar to speak today. Post-summer forward guidance will draw interest.

It is also a quiet US session. NY Empire State Manufacturing numbers for July will be in focus. However, barring a sharp decline, we do not expect the report to influence market risk sentiment.

According to the ISM survey, the US manufacturing sector contracted for the eighth consecutive month in June.