A raft of Chinese data released this morning points to weaker than expected economic activity. Chinese GDP growth came in at 4.7% y/y in Q2, down from both the 5.3% y/y growth seen in Q1 and the 5.1% than had been expected by markets. Industrial production grew 5.3% y/y in June, which while higher than expectations, was weaker than the 5.6% growth achieved in May. Retail sales saw their slowest pace of growth since 2022, pointing to Chinese consumers continued reticence to spend, growing just 2% y/y in June, after rising 3.7% y/y in May. The housing market remained weak, with property investment falling 10.1% y/y year-to-date. These data releases coincide with the start of the 3rd plenum meeting today, where Chinese political leaders will set the country’s long-term economic and political agenda.
US producer prices rose 0.2% m/m in June, higher than the upwardly revised 0% seen in May. The outturn was driven by a 0.6% m/m rise in services inflation, which was in turn largely due to higher margins at wholesalers and retailers. Goods inflation in contrast fell 0.5% m/m. On an annual basis PPI rose to 2.6% in June, from 2.4% y/y the month prior. Despite the rise in the headline metric, changes in several of the series used in the calculation of the PCE deflator were lower than that seen in May. A Bloomberg report suggests that those moves, taken together with last week’s CPI release, could see core PCE fall to 2.5% y/y in June from 2.6% in May.
Provisional results from the University of Michigan Sentiment survey declined to a value of 66.0 in July, from 68.2 in June. There were declines in both the current conditions and expectations components. Within individuals identifying as Democrats, the headline measure fell even further, declining by 8bps, possibly related to Biden’s poor debate performance a few weeks ago. Households’ annual inflation expectations (both one-year and 5-to-10 years ahead) declined to 2.9% from 3% in the June survey.
Consumer prices inflation in India rose for the first time in six months, increasing to 5.1% y/y in June from 4.8% in May, dampening chances of a rate cut by the RBI next month. Still-high food inflation fueled the rise in the headline measure, increasing to 8.4% y/y from 7.9% in May.
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