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Economic Activity Is Expected To Have Slowed In July


Offshore yuan is hugging a narrow range, USD/CNH last up 20 pips at 6.4795. Markets await the monthly economic indicators release due at 0300BST/1000HKT. Industrial production, retail sales, FAI and unemployment rate are all on the docket, as a note the LPR rate announcement is later this week.

  • Activity is expected to have slowed in July, though consensus expectations still indicate a robust economy. Morgan Stanley expects industrial production to have slipped to 7.8% Y/Y: "Upstream production likely moderated for another month amid decarbonization-related production cuts and floods, as reflected in softer-than-seasonal cement shipments in the month. On the other hand, production in high value-added industries likely held up relatively better, supported by sustained momentum in external demand."
  • Morgan Stanley expects FAI to have moderated to 11% Y/Y: "The key drag would be weaker property capex amid continued regulations, particularly with monthly land sales value for 300 cities dropping to -56% YoY (vs. 0.8% in June). Meanwhile, infrastructure capex growth may have also softened at the margin due to still-slow pace of local government bond issuance and disruption of floods and bad weather in some regions. On the other hand, manufacturing capex growth likely improved modestly, with robust external demand offsetting lingering margin pressures."

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