Chinese GDP q/y
figures beat estimates, but have continued to slow from where they were a year
ago. Global equity markets are up on the day because the 7.4% q/y growth
out of China beat analysts’ estimates. Forecasters estimated that the Chinese
economic data would come in at around 7.3%, as the economy has slowed from a
year earlier, but a surprise to the upside is a welcome relief for global markets
concerned about the slowing growth of China. Industrial production ytd/y and
Fixed Asset Investment ytd/y slowed, but retail sales y/y accelerated in the
past year. China’s current GDP growth is very high when compared to most
countries in the world, but it pales in comparison to the double-digit GDP growth
that it enjoyed for years. Analysts and planners maintain that the world’s most
populous country needs to sustain high levels of growth because of the high
number of migrant workers and young population entering the job market. This
puts pressure on Beijing to strategically invest in more government stimulus to
stop the slide of GDP growth.
In the United
Kingdom, the unemployment rate fell to 6.9% during the last month. This is the
lowest the unemployment rate has been since April 2009. The UK economy
continues to surprise on the upside, as the economy looks to be doing very well
and ticking back to life. Sterling received a boost against most major
currencies this morning when the data was released. The Bank of England
announced last year that the threshold for considering an interest rate
increase would be 7.0%, however they are unlikely to rush into any definite timeline.
As the unemployment rate fell more quickly than expected last autumn, the Bank
of England modified their forward-guidance strategy, saying that they will now consider
a broader range of economic indicators to assess the overall strength of the
economy when deciding whether or not to raise interest rates. Although this
does step up the pressure on the Bank of England, it is unlikely that this
alone will advance the timeline for an interest rate increase.
Nicholas Ebisch
Corporate Account Manager
Caxton FX
