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July Data Prints Reinforce Softer Domestic Demand Backdrop

CHINA DATA

China activity data for July has come in softer than expected. IP growth at 3.8% versus 4.3% expected, while retail sales also surprised on the downside 2.7%, against 4.9% forecast. FAI was at 5.7%, also below the 6.2% expected, while property investment continued to slow (-6.4%, versus -5.7% forecast). The headwinds to the property sector outweighing a likely pick up in infrastructure spending. The jobless rate eased to 5.4%, against a 5.5% forecast. However, the jobless rate for youth (16-24) hit a record high of 19.9%.

  • The commentary from China stats officials was also not encouraging, around global stagflation risks rising and China's economic recovery not being on a solid footing.
  • These data prints leave the earlier decision to cut the MLF rate a sensible one, particularly when combined with the weak credit data from Friday evening for July.
  • Today's prints will also likely see the China EASI roll back over to a degree, unwinding some of the trend improvement in recent months.
  • China asset markets have weakened following the print, USD/CNH is above 6.7650, while onshore equities are back lower reversing the earlier bounce after the MLF rate cut decision.

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