China – April activity

Chinese GDP is almost certainly contracting once again. The quality of the data makes it difficult to say how deep the fall is, but by my rough estimate, RGDP declined by perhaps 2-3% YoY in April.

The weakness in the activity data was broad-based in April, with retail sales, IP, and fixed asset investment all falling MoM. The tentative signs of a bottoming out of the property cycle also disappeared in April, with housing sales dropping 32% YoY, a weaker out turn than any time since 2008.

In the statement accompanying today's releases, the National Bureau of Statistics attributed the weakness to the shock from the domestic Covid-19 outbreak, and claimed there would be a smooth recovery once that was out of the way.

The lockdowns that are being used to get back to zero covid have clearly had a considerable impact on growth, and some sort of bounce can be expected when lockdowns end. However, it is notable that the weakness in April was more visible in industry than services. And yesterday's announcement of a cut in mortgage rates – given broad-based property easing had until now appeared to be off the agenda – clearly shows that officials are getting more worried about the cycle.