China’s Economy Expanded by 5.2% Year-Over-Year in Q4 vs. 5.3% Forecast

Highlights

• China’s economy expanded by 5.2% year-over-year in Q4, falling short of a 5.3% forecast.
• Retail sales weakened in December, while industrial production figures signaled a pickup in manufacturing sector activity.
• The markets will continue hoping for a meaningful stimulus package from Beijing to bolster the economy.

China: Economic Indicators Call for More Stimulus from Beijing

On Wednesday, the Chinese economy was in the spotlight. Industrial production, fixed asset investment, retail sales, unemployment, and Q4 GDP numbers warranted investor attention.

The economy expanded by 1.0% quarter-on-quarter in Q4 versus growth of 1.3% in Q3. Year-over-year, the economy grew by 5.2%, up from 4.9% year-over-year in Q3. Economists forecast quarterly growth of 1% and year-over-year growth of 5.3%.

However, retail sales and industrial production numbers sent mixed signals for December.

Retail sales rose by 7.4% versus 10.1% in November. Industrial production increased 6.8% versus 6.6% in November. Economists forecast retail sales and industrial production to increase by 8.0% and 6.6%, respectively. The unemployment rate unexpectedly rose from 5.0% to 5.1%.

Investors may consider the pickup in industrial production a favorable outcome, possibly signaling an improving demand environment. Nonetheless, softer growth could pressure Beijing to deliver more meaningful stimulus measures.

AUD/USD Reaction to Economic Indicators from China

Before the stats, the AUD/USD fell to a low of $0.65785 before rising to a high of $0.65931.

However, in response to the numbers from China, the AUD/USD fell to a low of $0.65879 before rising to a high of $0.65942.

On Wednesday, the AUD/USD was up 0.15% to $0.65937.

Next Up: US Retail Sales and Fed Speakers

On Wednesday, US retail sales will draw investor interest. Easing bets on a March Fed rate cut will put more emphasis on the numbers. A pickup in retail sales could give the Fed a reason to delay rate cuts.

Economists forecast retail sales to increase by 0.4% in December (Nov: +0.3%).

Other stats include housing sector-related data and industrial production numbers. However, the focus will be on the retail sales data.

Beyond the numbers, FOMC member commentary also needs consideration. FOMC members Michele Bowman, Michael Barr, and John Williams are on the calendar to speak. FOMC member comments on economic outlook, inflation, and interest rates warrant investor attention.