Chinese activity numbers for April fell short of consensus expectations but are judged here to be consistent with a firming growth trend.
Annual industrial output growth fell back to 6.0% in April from 6.8% in March, a nine-month high. A previous post suggested that the late timing of the Chinese New Year in 2015 had depressed February 2016 growth relative to trend, with a corresponding overshoot in March. A normalisation was expected in April. A three-month average is a better guide to the trend and rose in April to its highest level since August – see first chart.
The PBoC this week released additional monetary data for April, allowing calculation of the “true M1” narrow money measure monitored here. Annual growth of this measure rose further to 20.5% last month, the fastest since 2010 – second chart.
The preferred broad money measure here is M2 minus financial sector deposits, which are less likely to be related to future spending on goods and services. Such deposits grew strongly in 2014-15 but have stabilised this year. Annual growth of M2 minus financial sector deposits has risen since mid-2015 and, at 12.1%, is in the middle of its range in recent years – second chart. Faster growth of narrow money reflects a switch from time deposits into demand / temporary accounts, consistent with rising spending intentions.
