Early Friday we have an avalanche of data from China, all of which is potentially market-moving. Some of it can have far-reaching effects for markets all over the world. Even though it’s coming out in the relatively quieter Asian session, we could still have a substantial increase in volatility. This could influence traders when they come to their desks at the European and US open.
The most important data is likely to be China’s Q3 GDP. The latest optimism about US-China talks started after the last quarter had already finished. There is a pretty strong consensus that this will be the worst quarter for China in nearly ten years. But there might be some cause for optimism from some of the other data that covers only last month.
All the data comes out at the same time.
The consensus of projections for China’s quarterly GDP is that it grew 1.5% in the last quarter. This is a decline from 1.6% prior. By itself, this isn’t all that different from recent results. On an annualized basis, however, expectations are for just 6.1% growth. This is also less than 6.2% reported prior. By comparison, the government’s target range is between 6.0% and 6.5%. It’s getting close to dropping below 6.0%. This is seen as a key psychological level since China’s economy hasn’t grown this slow since the early ’90s.
Projections for lower GDP growth are based on the effects of the ongoing trade war. Last Monday, exports had the largest drop since February. Imports remained pretty much flat. Caixin services PMI for September also dropped and is just barely in expansion. This is an indication that the domestic market is being affected by trade difficulties. We might get further insight on that from the other data being released.
Retail sales are expected to bump up to 8.2% compared to 7.5% in August. This would be a sign that the domestic economy remains strong. This would be positive for the NZD since New Zealand exports primarily consumer goods to China. But, while it’s an improvement over the prior month, it’s still way below the long-term average. This would still be in line with the downward trend observed since the beginning of the trade war.
The unemployment rate is expected to remain at 5.2%. Despite the view that the official employment data is less than reliable, it still has been rising since the inception of the trade war. Seasonal effects would lead to an expectation of the rate declining in September. Therefore, no change from prior month could be interpreted as a negative sign.
Industrial production is expected to grow by 5.4% over the 4.4% registered in August. Again this better than prior month data is overshadowed by longer-term declines. With the majority of industrial production slated for export, the question is how is production increasing when exports are declining? Some of this could be attributable simply to factories pulling forward production ahead of the week-long National Day celebrations at the start of this month.
After the volatility from the major data releases calms down, we have the NBS press conference which will give the government’s view on the economy. There usually isn’t a set text, so we could have market-moving comments over the next hour or so. Attention will be on any comments regarding trade, and the effects of the recent thawing of relations with the US have had on the official economic outlook.