China Retail Sales Overshadow Industrial Production Boost Impacting the Hang Seng

Economic Indicators from China Send Mixed Signals

On Friday (May 17), economic data from China warranted investor attention. Fixed asset investment, unemployment, retail sales, and industrial production numbers were in focus.

Industrial production increased 6.7% year-on-year in April after rising 4.5% in March. Economists forecast an increase of 5.5%.

Retail sales advanced by 2.3% year-on-year in April after increasing 3.1% in March. Economists expected retail sales to rise by 3.8%.

Fixed asset investments were up 4.2% year-on-year, year-to-date, after rising 4.5% in March. Economists projected fixed asset investments to increase by 4.6%.

In April, the unemployment rate unexpectedly fell from 5.2% to 5.0%.

The economic indicators signaled an improving demand environment across the manufacturing sector, aligning with recent Caixin Manufacturing PMI numbers.

In April, the Caixin Manufacturing PMI increased from 51.1 to 51.4. The April survey highlighted a surge in demand from overseas, with new orders rising at the most marked pace in almost three-and-a-half years.

However, the retail sales figures could signal a deterioration in demand from consumers despite tighter labor market conditions.

China’s annual inflation rate rose from 0.1% to 0.3% in April. The upward trend in consumer prices signaled a pickup in demand-driven inflationary pressures. A pullback in consumer spending could reintroduce deflationary pressures.

The Hang Seng Index Reaction to the China Data

Before the economic indicators from China, the Hang Seng Index was up 0.95%.

However, in response to the numbers from China, the Hang Seng Index fell by 0.52% within five minutes of the data release.

Sub-indexes also felt the effects of the mixed data. The Hang Seng Mainland Properties Index (HSMPI) and the Hang Seng Tech Index (HSTECH) declined by 1.18% and 0.70%, respectively, within five minutes of the numbers.

However, the Hang Seng Index was up 0.50% to 19,474 on Friday despite the market reaction to the numbers.