Mon, 09/14/2020 – 22:54
China’s The National Bureau of Statistics reported the following figures for August:
- Industrial production came in at +5.6% yoy, above market expectations of 5.1%, and faster than the +4.8% yoy in July. Based on IP by major product data, cement production was up 6.6% yoy in August, faster than 3.6% yoy growth in July, while automobile production decelerated to 7.6% yoy, from +26.8% in July (when a favorable base effect contributed to the fast growth in automobile production). One thing to note – as Goldman points out, the sequential figures are highly sensitive to the specific seasonal adjustment methodology (NBS estimates +1.0% s.a. non-annualized in August, same as July).
- Retail sales registered the first positive year-over-year growth this year, and was also better than market expectations: retail sales growth was +0.5% y/y in August, vs. -1.1% in July, stronger than the 0% expected print, with automobile sales growth staying strong at +11.8% yoy, vs. +12.3% yoy in July. This marked the first growth in the retail sector this year, with January and February’s data having been combined to account for distortions relating to the pandemic.
- Fixed asset investment, the year-to-date value of spending on real estate, infrastructure and capital equipment, fell by 0.3 per cent from a year earlier in the first eight months of 2020, stronger than the -0.4% expected, and also an improvement from July’s -1.6% reading, as investment edges back towards growth following a collapse in the early part of the year.
- The survey unemployment rates edged down in August, from 5.7% to 5.6%.
Curiously, one day after China reported another monthly increase in housing prices, the NBS reported property development data that were mixed at best:
- Jan.-Aug. property sales value rises 1.6% y/y to 9.69t yuan
- Jan.-Aug. home sales value rises 4.1% y/y to 8.68t yuan
- Jan.-Aug. property sales area falls 3.3% y/y to 985m sqm
- Jan.-Aug. home sales area falls 2.5% y/y to 872m sqm
- Jan.-Aug. new property construction falls 3.6% y/y to 1399m sqm
And in some good news for the battered commodities sector (and value investors everywhere), China’s apparent oil demand rose almost double digits, up 9.9% to 13.51m b/d in Aug.
While the yuan was already surging ahead of the news, having risen above the key level of 6.80 which has proven to be a strong resistance on numerous prior occasions, the offshore yuan was last seen at 6.7884, the highest print since May 2019.
While China may be delighted to demonstrate the yuan’s strength, if purely from a political perspective, sooner or later, the deflationary aspect of the strong currency – especially in a world where global trade is still moribund – will soon start impacting the country which as we noted over the weekend, is injecting record amounts of credit to jumpstart a benign credit impulse and a global reflationary wave.
As Bloomberg’s George Lei writes, “the offshore yuan’s advance this quarter is poised to be among the best ever since the currency started trading a decade ago. For the onshore yuan, its 3.72% gain so far this quarter represents the best performance since 1Q 2008. From a trading perspective, it is difficult to go against momentum for long and not lose money. Yuan shorts piled up – and then were crushed hard – when the offshore currency fell to a record low of 7.1965 per dollar on May 27, before rallying for the next few months. This time might be different for the currency’s momentum, however. Multiple warning signs have already flashed, pointing to at least a stall – and quite possibly a reversal – in the currency’s recent rally.”
Perhaps, but judging by the latest strong economic data, that reversal won’t be today.
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Author: Tyler Durden