Chinese activity data surprises on downside in July, trade sector appears to have lost momentum

The Chinese activity data for July surprised on the downside by a broad margin. The weakening momentum, along with the moderation in trade growth, implies that the market might have to be ready for some downside bias in the third quarter. Meanwhile, investment growth decelerated considerably in July, indicating towards the financial risks rooted in public-private-partnership investment.

The significant disappointment of the July data illustrates a downside risk for the third quarter GDP growth. In particular, industrial production expanded 6.4 percent year-on-year, a slowdown from the prior month’s 7.6 percent growth. Retail sales rose 10.4 percent year-on-year as compared with June’s 11 percent. Moreover, the fixed asset investment rose 8.3 percent year-on-year to date in January-July, as compared with the earlier reading at 8.6 percent. After seasonal adjustment, it is seen that all activity indicators have lost momentum, noted Commerzbank in a research report.

Industrial production grew 0.41 percent sequentially in July, just half of the 0.81 percent growth in the earlier month. Retail sales and fixed asset investment rose 0.73 percent and 0.61 percent sequentially, respectively in July, as compared with 0.91 percent and 0.73 percent in the prior month.

China has a bumpy start in the third quarter, which is consistent with the weak trade figures released in the last week. The  trend growth implies that China’s trade sector has lose momentum as well, stated Commerzbank.

At 22:00 GMT the FxWirePro's Hourly Strength Index of Chinese Yuan was highly bearish at -107.142, while the FxWirePro's Hourly Strength Index of US Dollar was slightly bullish at 82.0472. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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