(Bloomberg) -- China economic data due this week are forecast to show the expansion holding up or even accelerating, and may signal whether escalating trade tensions are weighing on growth.
Industrial production, retail sales, fixed investment and the new jobless rate will be released Tuesday at 10 a.m. in Beijing, which is 10 p.m. Monday in New York. April factory output is forecast to accelerate, rising 6.4 percent from a year earlier, according to economists surveyed by Bloomberg last week. Retail sales growth projected at 10 percent would be a tad weaker than March, while investment growth year-to-date probably slowed to 7.4 percent.
The reports will be the among the first official gauges unaffected by the Lunar New Year holiday, which began later this year, in February, skewing on-year comparisons for the first three months. Continued resilience would give policy makers a greater buffer amid rising uncertainty as trade disputes and debt crackdowns could drag on growth later this year.
“We may see firm activity in April and May after a weak March,” but headwinds could gather in the second half of this year, UBS Group AG economists Zhang Ning and Wang Tao wrote in a note. They cited risks from more trade frictions and prolonged negotiations.
With U.S. tariffs potentially hitting Chinese goods as soon as this month, industrial output would come into sharper focus. If trade talks stall, output of machinery and equipment may be due to weaken further as the Trump administration’s tariff list focuses on technology products. Communications equipment, computers and electronic devices also could suffer.
Another signal would come from industrial output data for the value of exports delivered, a gauge of goods produced for export but not necessarily shipped. Compared with volatile export numbers, it’s a more stable gauge of external demand. In addition, manufacturers in the statistics bureau sample are relatively large and probably not agile enough to front-load shipments ahead of tariffs, as economists say small exporters likely have been doing.
Another casualty of trade tension may be business confidence to upgrade, expand and spend. Investment data for manufacturers’ spending might edge up and help give a boost to the expansion, according to Zhu Qibing, chief macroeconomy analyst at BOC International China Ltd. in Beijing. However, he added that momentum could vary across different industries.
Investment in telecommunications manufacturing equipment jumped 15.4 percent in the first quarter from a year earlier, though that’s poised to weaken if the U.S. steers its purchases elsewhere in coming months. Drugmakers, smelters and chemical producers saw investment fall, but as China pledges to fully open its manufacturing sector to foreign investors, that might be poised to eventually rebound.
Investment data help gauge sentiment in the real estate sector, which UBS estimates makes up almost a quarter of final demand when related need for goods like metals and chemicals are included. Besides property development investment, which rebounded early this year, home sales will signal how strong demand is and new construction by area indicates supply.
Consumers, the pillar of the more than $12 trillion economy, are still spending generously. While total retail sales include purchases by government, businesses and other entities, online sales better highlight buying by individuals. Cosmetics and jewelry surged in March, while shoppers had less of an appetite for communications devices such as phones.
For the second month, the statistics bureau will release an internationally-comparable unemployment rate based on household surveys. The headline number may remain stable. A private gauge from recruitment website Zhaopin.com dropped in the first quarter on seasonal effects, as labor demand fell in most sectors except for intermediary and leasing services.
©2018 Bloomberg L.P.
With assistance from Xiaoqing Pi