Daily Commentary BY THE CURVE TEAM –

Chinese Data Surprises, US Economy Still Strong

18th of April, 2019

Fears of a global growth slowdown have eased somewhat as the latest data out of China surprises and the US economic outlook remain solid.

Much like the latest PMI data earlier in the month, the latest activity indicators from the Chinese economy have bucked the trend we have seen globally and surprised on the upside. It suggests that efforts by Chinese officials to support the economy through targeted stimulus are working.

The monthly data dump of activity indicators all came in ahead of the markets expectations for the month of March. Industrial production provided the biggest beat against estimates while retail sales and fixed asset investment were also upbeat over the month. The monthly data was also accompanied by the latest quarterly GDP figures which showed the annual rate of growth remained unchanged at 6.4% after it was expected to slow.

Interestingly the pick up in activity was driven by domestic industries, rather than those trade exposed industries. That sits consistent with the Chinese trade data over the past few months as well as the data from other countries along the supply chain, such as Germany, who have seen their data deteriorate sharply.

The slowdown hasn’t impact the US economy with the latest Beige Book, a summary of activity across the 12 Federal Reserve Districts, pointing to a solid outlook for the economy. The Beige Book more specifically said that:

“Economic activity expanded at a slight-to-moderate pace in March and early April. While most Districts reported that growth continued at a similar pace as the previous report, a few Districts reported some strengthening. There was little change in the outlook among contacts in reporting Districts, with those expecting slight-to-modest growth in the months ahead.”

So those expecting the Fed to walk further back from their normalisation of monetary policy after pausing over the past month could be disappointed.

The focus will shift back to the domestic outlook today with the release of the latest labour force data at 11:30 this morning. The market is expecting jobs growth of 15,000 with the unemployment rate expected to edge back up to 5%.

David Flanagan

Director - Interest Rate Markets