China July Data Outlook: Goldman Sachs Sees Industrial Growth Below Consensus as Base Effects Distort Readings
Goldman Sachs forecasts China’s July industrial value-added growth will slow to 4.6%, while fixed-asset investment growth improves to -6.4% and retail sales growth reaches 1.5%.
Goldman Sachs forecasts China’s July industrial value-added growth will slow to 4.6%, while fixed-asset investment growth improves to -6.4% and retail sales growth reaches 1.5%. The forecasts are based mainly on slower export growth, a contraction in steel production and base effects following the withdrawal of consumption policies.
The report says its forecasts for industrial production and investment growth are below market consensus, while its retail sales forecast is in line with consensus.
Bottom line: China’s July economic data are likely to be significantly distorted by base effects. Industrial value-added growth may come in below market expectations, but the slowdown would reflect base-related volatility more than a deterioration in the underlying trend.
The near-term outlook is modestly negative for Chinese industrial stocks if industrial value-added growth falls below consensus, although the medium- and long-term outlook will depend on the underlying trend after the data distortion fades. The market already has cautious expectations for the July data, but downside risk relative to consensus remains.
Key catalysts are the release of July industrial value-added, fixed-asset investment and retail sales data; any policy response; and August high-frequency data that could validate the economic trend. Indicators to watch include industrial value added, fixed-asset investment and retail sales.
The report says its forecasts for industrial production and investment growth are below market consensus, while its retail sales forecast is in line with consensus.
Bottom line: China’s July economic data are likely to be significantly distorted by base effects. Industrial value-added growth may come in below market expectations, but the slowdown would reflect base-related volatility more than a deterioration in the underlying trend.
The near-term outlook is modestly negative for Chinese industrial stocks if industrial value-added growth falls below consensus, although the medium- and long-term outlook will depend on the underlying trend after the data distortion fades. The market already has cautious expectations for the July data, but downside risk relative to consensus remains.
Key catalysts are the release of July industrial value-added, fixed-asset investment and retail sales data; any policy response; and August high-frequency data that could validate the economic trend. Indicators to watch include industrial value added, fixed-asset investment and retail sales.