BNY Mellon IM: Lale Akoner comments on the latest Chinese growth statistics

BNY Mellon IM: Lale Akoner comments on the latest Chinese growth statistics

China
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Lale Akoner, Market Strategist at BNY Mellon Investment Management, comments on the latest Chinese growth statistics:

“China’s Q1 GDP contraction of 6.8% y/y (compared to +6.0% in Q4 2019), due to Cov19’s effect on the economy is in line with our base case scenario. Chinese growth will be hit hard for 2 quarters, with output falling by 10% or more in the 1H, to be followed by a strong recovery during the second half of the year as inventories are rebuilt and services production/consumption resumes.”

“The recent strong March activity data makes us confident that a V-shaped recovery for China in H2 will materialize. As economic activity restarted upon improving virus situation, we see improving industrial production exceeding expectations and up by almost 37% on a monthly basis (annualized). This implies that supply side of the economy is leading the recovery as work resumption is in place (SMEs still lag in back-to-work, which we monitor closely) .  Demand side of the economy shows weakness as virus changed spending patterns of consumers and businesses – as expected.  Hence retail sales and fixed investment declined. We expect to see demand side recovery to catch-up to supply side in the next few months as the virus’ impact on spending behaviours of consumers and businesses diminishes (as long as a second wave of contagion does not materialize).”