The headline risk here, folks, is that if you wait for your central banker to give you insight into ...
Hmm, China GDP Growth Hits Official Target of 7.5% Exactly in June Quarter
07/16/2014 4:40 pm EST
It may be an eerie coincidence that today’s report of China’s second quarter 7.5% growth rate perfectly matches the government’s target growth rate of 7.5% for 2014, but despite his skepticism, MoneyShow’s Jim Jubak still thinks the number’s important.
Ah, the magic number. Economic growth accelerated in China for the first time in three quarters. Gross domestic product climbed 7.5% in the second quarter of 2014 from the second quarter of 2013.
That 7.5% growth—in an amazing coincidence—exactly matches the government’s target of 7.5% growth for 2014. (Economists surveyed by Bloomberg were looking for 7.4% this quarter.)
You’ll note my skepticism about the neatness of the number—but even with my doubts about the all-too-exact correspondence of the reported figure and the target—I still think today’s report is important.
All the underlying data reported today argues that the government has decided to add stimulus to the Chinese economy. Whether that stimulus is enough to hit the precise 7.5% target is beside the point. What was reported today is solid evidence that China has decided to ramp up growth again. Probably not to the former 9% or 10% level, but enough to keep growth in the economy from falling below 7%.
Industrial production rose by 9.2% year over year in June. That was above the 9% consensus forecast and above the 8.8% gain in May. Retail sales climbed by 12.4% year over year versus a 12.5% forecast. Investment in fixed assets, excluding rural households, grew by 17.3% in the first half of the year.
All this is consistent with the growth in new bank loans announced by the People’s Bank of China yesterday. In June, Chinese banks made 1.08 trillion ($173 billion) in new loans. That was up from May and above expectations for 915 billion in new loans for June. Money supply, measured by M2, grew by 14.7% in June from June 2013. Economists surveyed by Reuters had forecast growth of 13.5%.
The broad Chinese market had expected something like these numbers and so today we had a mild case of buy the rumor/sell the fact. The Shanghai Composite Index fell 0.15% for the day.
Hong Kong’s Hang Seng, however, climbed 0.27% as shares of property developers, which are more heavily represented in the Hong Kong index, climbed. That trend carried over to property stocks in Shanghai, which, as a group, rose 1.2%. More lending from banks will have a disproportionately large effect on a property sector that is experiencing falling sales.
A gauge of property stocks in the Shanghai index rose 1.2%, the most among five industry groups. Poly Real Estate, the second-biggest developer, gained 2.7%. China State Construction Engineering Corp. jumped 3.8%.
The value of homes sold climbed to 591.2 billion yuan ($95.2 billion) last month from 446.1 billion yuan in May, according to the difference between the National Statistics Bureau’s data for the first half of the year and the first five months. That was the biggest monthly gain this year.
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