China Retail Sales Rebound as Industrial Production Slows; Hang Seng Index Steadies

China Economic Data Eases Economic Growth Jitters

China’s economy faced scrutiny on Monday, June 16, as markets monitored developments in the Middle East. Key economic indicators eased concerns over the impact of the US-China trade war and Beijing’s absence of fresh stimulus on China’s economic momentum. The economic reports released on June 16 covered the housing market, fixed asset investments, industrial production, retail sales, and unemployment.

Housing Prices Fall at a Slower Pace

Housing sector data signaled an improving demand backdrop. The House Price Index fell 3.5% year-on-year (YoY) in May after dropping 4.0% in April. For context, house prices had fallen 5.9% YoY in October, underscoring the effectiveness of Beijing’s efforts to stabilize the real estate market. Economists had expected house prices to fall 4.3%. The Hang Seng Mainland Properties Index responded to the data, rising 0.50% in early trading.

Retail Sales and Unemployment Numbers Impress

Crucial economic data from China also underscored the effectiveness of Beijing’s policy measures targeting domestic consumption while steadying the labor market.

• Retail Sales: +6.4 YoY in May compared with +5.1% in April.
• Unemployment Rate: Drops from 5.1% in April to 5.0% in May.
• Industrial Production: +5.8% YoY in May, down from 6.1% in April.

May’s unemployment and retail sales data suggest the US-China trade war had a limited impact on hiring trends and consumer sentiment. Beijing’s stimulus roll outs targeted domestic consumption while aiming to bolster the labor market to counter the effects of tariffs on China’s economy.

Meanwhile, fixed asset investment and industrial production weakened more than expected. Despite the softer numbers, industrial production levels remained well above historical lows, also easing fears of a marked economic slowdown.

Market Reaction to China’s Economic Indicators

The Hang Seng Index and the AUD/USD pair reacted to the upbeat data. However, the Israel-Iran war remained a headwind.

On Monday, June 16, the Hang Seng Index rose from 23,854 to a high of 23,891 in response to the data before retreating. While the initial response was positive, the Index was down 0.18% to 23,850 as Middle East tensions simmered.

In the forex markets, the AUD/USD pair responded to the China stats, briefly falling to a low of $0.64766 before rebounding to a high of $0.64852. At the time of writing, the AUD/USD pair was down 0.05% to $0.64817.

Despite the mixed data, strong labor and consumption figures, along with resilient production, offer some relief. Nevertheless, traders should track policy updates from Beijing. However, progress toward a US-China trade deal may put further stimulus plans on hold.

Looking Ahead

Beijing’s stimulus pledges remain crucial for Mainland China and Hong Kong-listed stocks. However, traders should also closely track trade developments, the Israel-Iran conflict, and the upcoming Fed interest rate decision and policy signals here. Given the ongoing economic and geopolitical uncertainties, a cautious approach remains essential.