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Chinese Retail Sales data for April was great, while Industrial Production was merely good

Research Edge Position: Long Chinese Equities via CAF


At 7.1%, year-over-year Industrial output data released by the National Bureau of Statistics On Tuesday evening came in lower than anticipated by most observers. While in light of collapsed external demand the lessened output growth is not surprising, it was still disappointing for bulls like ourselves to see lagging components like electricity which declined 3.5% Y/Y, and Telecommunications/Computers which grew by just 1.1% Y/Y.  We were hoping to see a broadening of production increases beyond just components directly tied to stimulus infrastructure investments like transportation equipment and cement up 9.6% and 12.9% Y/Y respectively.

Retail sales data for April also released by the NBS on the 13th provided better support for the bullish long term domestic demand thesis. At 934 billion Yuan, total retail sales grew at a 14.8% Y/Y -a massively bullish number even if the figures have not yet had the impact on the manufacturing sector we were looking for. While stimulus rebates have helped sales of big ticket items (as expected after last week's CAAM sales data, automotive figures crushed it with Motor Vehicle production up 17.9% y/y and sales up 18.5%) , retail shoppers have not appeared to abandon their taste for small luxuries either, with discretionary components like cosmetics and furniture showing healthy double digit y/y growth.

Put in contrast with yesterday's disappointing US retail data, the growth rate of China's consumer spending underscores the changing nature of global consumption. If the individual consumer in China continues to spend money with confidence, ultimately it will translate to imports beyond just cotton and iron ore and production growth beyond just rebar and concrete.


Andrew Barber
Director

GREAT EXPECTATIONS - retailsales