MNI DATA ANALYSIS: China April Economic Data Miss Forecast

     BEIJING (MNI) - China's macroeconomic indicators in April failed to match

March's apparent strengths or market forecasts, raising speculation for further

stimulus to shore up sentiment as an escalated trade war with the U.S. stirs up

unease. 

     Rather than using broad-based monetary easing and policy rate cuts,

policymakers will favor targeted monetary policies, industrial subsidies, and

fiscal policy, including tax cuts, to counter the downside risks, ANZ said in a

note sent to MNI.

     Retail sales hit a 16-year low in April, while industrial output fell

sharply from a four-and-a-half-year high in March, data released by the National

Bureau of Statistics (NBS) on Wednesday showed. Fixed-asset investment (FAI)

edged down moderately, helped by strong property investment.

     Retail sales grew 7.2% y/y, below 8.6% forecast polled by MNI or March's

8.7%. This was the lowest level since May 2003.

     --LESS HOLIDAYS

     The NBS attributed the decline to less holidays in April. Excluding the

factor that the number of holidays in April was two days less than in same

period last year, the figure would grow by 8.7% y/y, a spokeswoman said.

     Housing-related consumption growth led the fall back in April despite

healthy home sales data. The sales of home appliances, communication equipment,

construction material and furniture grew 3.2%, 2.1%, -0.3% and 4.2% y/y

respectively, losing 12, 11.7, 11.1 and 8.6 percentage points (PPs) from March.

     Consumption of clothing, cosmetic products as well as cigarette and wine

all slowed, though auto sales fell at a slower pace, declining 2.1% in April,

compared to the 4.4% in March.

     Industrial output expansion slowed sharply to 5.4% y/y in April from

March's 8.5%, below the 6.3% projection by MNI.

     This reverses nearly all of the surge in March and confirms that the end-Q1

jump was driven by seasonal distortions and a run up in inventories of input

materials ahead of the value-added tax (VAT) cut on 1 April, said Capital

Economics in a note to MNI.

     --VAT DISTORTIONS

     NBS spokeswomen Liu Aihua also attributed the deceleration to the

implementation of VAT reduction, which prompted businesses to ramp up production

in March, while emphasized that growth in the first four months as a whole was

quite stable. Month-to-month variations were not enough to define a trend, Liu

added.

     Fixed-asset investment (FAI) recorded 6.1% y/y growth in Jan-April, missing

the 6.4% median forecast in an MNI survey and lower than the 6.3% recorded in

the first three months.

     One brighter spot is property investment, which rose by 11.9% y/y,

continuing 11.8% in Jan-March.

     The better-than-expected performance of the real estate sector since the

beginning of this year has become one of the key drivers of the Chinese growth,

said Deng Haiqing, chief economist at Wallstreet CN, noting that property will

continue to bolster the economy.

     Housing starts jumped to 13.1% from March's 11.9% and 6.0% in Jan-Feb

period. Growth of developers' funding, which holds the key to property

investment, also jumped to 8.9% y/y, the fastest in 20 months, an ANZ report

pointed out.

     The steady property investment gain helped offset the slowdown in

infrastructure spending and manufacturing investment, which increased by 4.4%

and 2.5% y/y respectively, slower than 4.6% in the first three months.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: wanxia.lin@marketnews.com

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

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