Chinese Q1 GDP was the weakest in decades on the offical reading. The TS Lombard recalculation shows it to be even weaker at 5.2% yoy. Rory Green writes:
TS Lombard’s China GDP calculation puts real real Q1/19 GDP growth at 5.2% yoy, the same as Q4/18, but the third lowest quarterly growth rate in our series (chart-below-left). The official data and our own estimates both show weaker domestic demand in Q1. This actually helped net exports recover to boost GDP growth (chart-below-right). March monthly indicators for industrial production, retail sales and investment, show very early signs that fiscal frontloading is supporting activity. However, the weakness of nominal growth, which fell to 7.8%, will add further pressure on profits, capacity utilisation and manufacturing investment.
Amidst the Sino-US trade war, net exports made their first positive contribution to GDP growth since Q2/17. The positive outcome belies domestic weakness. The gain in net exports was greater than the deceleration in domestic demand and investment. In Q1/19 imports fell -4.3% yoy, while exports gained 0.5% yoy. Global demand, particularly from Europe surprised to the upside, yet high domestic inventories of both industrial commodities and finished goods weighed on imports. Leading indicators point to further softness in global demand. We expect import growth to outstrip that of exports, and net export growth contribution to turn negative.
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