Macroscope | China’s economy hasn’t hit bottom yet. The good news is that it will in the next quarter
- Despite decent sales during the Lunar New Year, declining demand is likely to push China’s economy further down before loosening credit takes effect in the second quarter and sparks a recovery
A mixed bag of macro data so far in 2019 suggests that while the growth momentum in the Chinese economy remains weak, there is a glimpse of light at the end of the tunnel.
To be fair, the volume of data that may be used to gauge the economic pulse is not great at the moment. Given the seasonal distortion of the Lunar New Year, the National Bureau of Statistics has as usual decided to postpone the release of key January activity data until mid-March. This creates a hiatus in the data flow that makes assessing the condition of the economy more difficult.
Despite the lack of regular data points, seasoned China watchers know where to look. To start, various government ministries publish consumer spending data during the Lunar New Year holiday, which can be used to gauge the current status of domestic demand.
The results, however, can be interpreted differently, depending on how you look at the data. For optimists, the record-breaking retail sales, strong box office revenue and solid growth in tourist numbers – particularly international travels – suggest that household spending has held up well despite the general economic downturn. Even comparing these numbers with the same period last year, the 8.5 per cent (year on year) growth in retail sales is still decent, better than the December sales growth of 8.2 per cent.
