China’s Economic Data Likely to be on our Radar

Beginning tomorrow, China will release a plethora of economic data which will keep investors on the edge of their seats. We will be looking, keenly, at their economic growth as we try to get a handle on global economic growth. Weakness here, fueled last week’s global stock selloff.

Tomorrow we kick things off as the world’s second largest economy will release its gross domestic product (GDP) as well as its third quarter industrial output number. We also get fixed asset investment and retail sales for September. Should we get unexpected weakness in these numbers, it could then spark a new wave of global selling. Investors are already jittery thanks to Europe, Ebola and trying to guess when the U.S. Federal Reserve will hike rates.

We are expecting the GDP to come in at 7.2 percent on an annual basis. This is down from the 7.5 percent we saw last quarter. There are problems with a weakening housing market and that has hit the economy hard. We are seeing production problems in commodities and investment issues stemming from this slowdown. The one bright spot in all of this was the pickup in exports. However, this surprise pickup is not enough to keep the economy from missing its growth target.

We are expecting China’s retail sales to grow at 11.8 percent, year on year. This number came in at 11.9 percent in August. The industrial output number should come in at 7.5 percent. This is up from the 6.9 percent seen the previous month. Beijing is continuing to close down factories in sectors showing overcapacity. So far, the results are not terribly clear which means industrial production I likely to come in weak. It will continue to underperform as long as the People’s Bank of China (PBOC) maintains a restrictive monetary policy.

Later this week, on Thursday, we get October’s HSBC reading on China’s manufacturing activity. This should come in around 50 indicating stable growth.

To top things off, the all-powerful communist party is set to start its fourth plenum in Beijing today. This meeting, which lasts three days, always impacts the economy as well as Chinese society in general and its effect lasts for several years. We had a fragmented, and confusing, decade from 2003 to 2013 but we are looking to the new President Xi Jinping to offer a stronger push for serious and desperately needed economic and societal reforms. This is needed for the economic rebalancing towards a consumer based economy.