What to Focus on in China's GDP Report: Jobs, Debt, Factories

(Bloomberg) -- China’s economy is giving no clear sign yet that trade tensions and a financial clean-up are slowing growth. Here’s how to spot what could be on the horizon this year using the data in Tuesday’s big data release.

The gross domestic product report due Tuesday at 10 a.m. in Beijing time, or 10 p.m. Monday in New York, will show the world’s second-biggest economy expanded 6.8 percent in the first quarter from a year earlier, according to the median estimate in a Bloomberg survey.

Industrial output, fixed investment and retail sales data will be released at the same time, along with the debut of the first regularly-updated monthly survey-based jobless rate.

Robust growth doesn’t mean President Xi Jinping and his top economic aides are worry-free. A campaign to reduce debt may start to weigh on investment. Robust external demand, which fueled last year’s pickup in output, faces threats from trade disputes with the U.S.

Beyond the headline numbers, look for these five things:

Debt Cleanup

With the fresh GDP figures, a calculator will be useful to find the total aggregate financing stock relative to the size of the economy, an indicator of overall credit.

While last year’s deleveraging push focused mostly on inter-bank lending and wealth management products, policy makers are moving to a broader range of borrowing. At the first meeting of the new Central Committee for Financial and Economic Affairs, which is led by Xi, senior leaders said local governments and enterprises, especially state-owned firms, should reduce leverage, according to a report this month by the official Xinhua News Agency.

What to Focus on in China's GDP Report: Jobs, Debt, Factories

The broadest gauge of new credit, which excludes lending between financial institutions, trailed estimates in March amid a contraction in shadow banking. The overall debt-to-GDP ratio will also stabilize this year, according to economists surveyed by Bloomberg in March.

Investment Breakdown

Debt fuels fixed-asset investment, a key support for decades of rapid economic growth. With curbs taking effect, all three major types of investment --real estate development, infrastructure and manufacturing -- were seen slowing by economists in a Bloomberg survey.

What to Focus on in China's GDP Report: Jobs, Debt, Factories

The question is the pace of the slowdown and which sectors will bear the brunt. Tuesday’s fixed-investment release will break down spending by sector. An especially sharp drop for property development would be a warning, and belt-tightening by local governments may damp infrastructure spending. Factory investment probably held up better amid solid profit growth.

New Job Gauge

For the first time, the statistics bureau will regularly update a globally comparable jobless rate that’s based on household surveys in dozens of cities around the country, rather than based on unemployment-benefit filings. Previously, the bureau gave only sporadic updates for the figure, which stood just below 5 percent in February.

At the annual gathering of the National People’s Congress in March, Premier Li Keqiang also set the first target for the rate, saying it should be kept below 5.5 percent this year.

Nominal Growth

Nominal GDP growth, which isn’t inflation-adjusted, jumped last year as factory inflation surged. That will ease this year as producer price gains moderated for five straight months. That means corporate revenue, tax income and wages -- all in nominal terms -- may post slower gains.

Export Signals

One data point on industrial output can help gauge the next month’s export momentum, according to an economist who accurately forecast the March exports drop. On Tuesday, the “value of exports delivered” line in that report -- meaning goods produced for export but not necessarily shipped -- will be included in the statement. That may help analysts gauge how Chinese factories have reacted during the recent trade spat.

©2018 Bloomberg L.P.

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