Australian markets react to Chinese GDP data

Friday 15 April 2016
Nic Crowther's picture
Co Editor
The Shaker

While we’re talking economics and China, today saw the release of its quarterly GDP report. The big question will be around growth for the previous three months, and whether or not the magic number meets analysts’ expectations.



Targets on track.... again

You can bet that it will. Successive reports have put growth within 0.1% of the predicted figure – only adding fuel to the fire of rumours that circles the authenticity of official numbers. Bloomberg’s Tom Orlik is certainly sceptical, with the following tweet expressing wry doubt:




The Chinese economic transition

To support this, offers the following:

Consumers keep rising as old industry declines. Retail sales and industrial production are heading in opposite directions. Retail sales growth reached 11.1% year over year in December, a tick less than last December, but sales continued rising faster than most of last year.

Industrial production rose 5.9% year over year last month, slower than November’s 6.2%. Investment in fixed assets, which grew at an annual clip of over 25% in the four years following the 2008 crash, grew ‘only’ 10%, its slowest rate since 2001. Both are now exerting a substantial drag on the overall economy.



The good news is that in this week’s World Economic Outlook, the International Monetary Fund lifted expectations for China’s growth through 2016 and 2017 by 0.2 points (to 6.5% and 6.2% respectively).

If nothing else, this expresses some faith in the China’s efforts to manage the transition of it’s economy from primary and secondary industries through to a period of strong domestic consumption.


Chinese GDP growth - 1996-2015 (Source: World Bank)


Domestic market reactions

After starting the day at a recent high of US$0.77, the announcement moved the Aussie a mere 0.05c – as clear a sign as any that markets had already factored in China’s GDP results. Even the ASX barely rippled after the announcement although it was interesting to see that two of the biggest movers on the ASX today were Bellamy's (baby powder) and Ansell (condoms).

Please feel free to draw whatever conclusions you like from that information!