China Economic Indicators Signal a Possible Momentum Shift

Highlights

• The Chinese economy was in the spotlight on Friday.
• Industrial production and retail sales figures signaled an improving demand environment.
• However, house prices remained a headwind.

Economic Indicators from China Trend Higher

On Friday, the Chinese economy was in the spotlight. The recent CPI Report flashed deflation, raising concerns about the economy. However, today’s numbers sent a rosier picture.

Retail sales, industrial production, fixed asset investment, unemployment, and house price figures garnered investor attention.

House price data kicked off the data splurge. In November, house prices declined by 0.2% year-over-year, in line with forecasts. House prices were down 0.1% in October. There was no immediate market reaction despite market concerns about the housing sector.

However, better-than-expected industrial production numbers countered weaker-than-expected fixed asset investment and retail sales.

Industrial production increased by 6.6% year-over-year in November vs. 4.6% in October. Economists forecast production to rise by 5.6%. Fixed asset investment stalled in November, rising by 2.9% year-over-year vs. 2.9% in October.

Retail sales increased by 10.1 year-over-year vs. 7.6% in October. However, economists forecast an increase of 12.5%.

Chinese economic activity improved in November and could ease market expectations of fresh stimulus from Beijing. However, the markets may need more economic indicators, including trade data, to understand the source of the demand. The November private sector PMI surveys highlighted weak global demand, which could continue driving deflationary pressures.

Thursday Overview of the AUD/USD

Before the numbers, the AUD/USD fell to a low of $0.66924 before rising to a high of $0.67034.

However, in response to the numbers, the Aussie dollar fell to a post-stat low of $0.66962 before rising to a high of $0.67036.

This morning, the Aussie dollar was up 0.08% to $0.67012.

European and US private-sector PMIs in Focus

On Friday, private sector PMIs from Europe and the US also need consideration. Trends in private sector activity could influence demand and impact commodity currencies. A pickup in private sector activity would signal an improving demand environment and an increased need for raw materials.