Hello, forex friends! Now that China’s data dump is mostly over, it’s time for another roundup of the most important economic reports.

Note: As with all Economic Snapshots, there are nifty tables at the bottom, so you can skip to those if you’re a forex trader who’s in a hurry. The bullet points provided highlight the underlying details and trends that give the numbers their proper context, however.

Growth

  • China’s Q1 2017 GDP grew by 1.3% quarter-on-quarter.
  • This is the slowest reading in four quarters and marks the third quarter of slowing growth after peaking at 1.9% back in Q2 2016.
  • Year-on-year, GDP grew by 6.9%, which is the fastest rate of annual growth in six quarters.
  • This also marks the second quarter of faster year-on-year growth.
  • Furthermore, this means that China is currently on track to hit the PBoC’s 2017 GDP target.
  • For reference, the PBoC’s target for annual GDP growth in 2017 is around 6.5%.
  • No detailed breakdown using the output approach yet.
  • However, the official press statement from the National Bureau of Statistics of China (NBS) notes that growth was driven by the 7.7% growth in the tertiary industry, which refers mainly to the service sector.
  • The other main driver was the 6.4% increase in the secondary industry, which includes manufacturing, mining, construction, and utilities.
  • No detailed breakdown using the expenditure approach as well.
  • However, the press statement also mentioned that investments in fixed assets grew by 9.9% year-on-year in Q1 2017.
  • Consumer spending was also apparently a driver, since retail sales increased by 10.0% year-on-year in Q1.
  • As for trade, exports grew by 14.8% year-on-year.
  • This was partially offset by the 31.1% year-on-year increase in imports.

Inflation

  • The headline reading for China’s CPI fell by 0.3% month-on-month in March.
  • This marks the second consecutive negative reading after February’s 0.2% tumble.
  • The biggest drag was the 1.3% fall in food prices, which was due mainly to cheaper fresh vegetables.
  • The 0.4% slide in the cost of transportation and communications was also a drag.
  • And the same can be said of the 0.2% fall in the cost of education, culture, and recreation.
  • All other CPI components printed an increase.
  • Year-on-year, CPI grew by 0.9% in March.
  • This is a tick higher than February’s +0.8%.
  • Even so, this is still the second poorest reading in 26 months.
  • The weak reading in February was due to the 2.4% slump in food prices, due primarily to the 26.0% drop in the price of fresh vegetables.
  • In March, food was the only drag, plunging by another 2.4%, thanks to the 27.9% slump in the price of fresh vegetables.
  • Most food items are stripped from the core reading, which is why it accelerated from 1.8% to 2.0%.

Business Conditions & Sentiment

  • The official manufacturing PMI reading from NBS improved slightly from 51.6 to 51.8.
  • This is the highest reading since April 2012.
  • The higher headline reading was driven mainly by production index, since it jumped from 53.7 to 54.2.
  • It also helped that the new orders index improved from 53.0 to 53.3.
  • The new export orders sub-index, in particular, improved from 50.8 to 51.0.
  • The manufacturing PMI report from Caixin/Markit disagrees with NBS, since Caixin/Markit’s PMI reading deteriorated from 51.7 to 51.2.
  • Moreover, commentary from Caixin/Markit noted that “growth in production and new orders slowed since February, with new export sales increasing at the weakest pace in three months.”
  • This obviously goes against NBS, since NBS printed an improvement in its production and new orders indices, including its new exports orders sub-index.
  • Moving on, the official non-manufacturing PMI reading for March jumped from 54.2 to 55.1.
  • This is the best reading since May 2014.
  • Interestingly enough, the headline reading jumped, even though most of the sub-indices actually deteriorated.
  • Anyhow, domestic demand seems to be picking up, since the new orders index rose from 51.2 to 51.9.
  • Meanwhile, the foreign new orders sub-index fell from 50.1 to 48.8.
  • As for the service PMI reading from Markit/Caixin, it slid from 52.6 to 52.2.
  • This is the weakest reading in six months.
  • The weaker reading was blamed to the “new business sub-index [showing] its lowest reading since last September.”
  • Moving on, total industrial production in China grew surged by 7.6% year-on-year in March.
  • This is the fastest year-on-year rate of expansion since December 2014.
  • The surge in industrial production was driven primarily by the 8.0% surge in manufacturing output.
  • This is the largest increase in manufacturing output since December 2014.

Trade

  • China’s dollar-denominated trade surplus in March was $23.92 billion after printing a $9.15 billion deficit previously.
  • The surplus was due to exports surging by a whopping 50.4% month-on-month, which easily offset the 21.2% increase in imports.
  • Year-on-year, exports increase by 16.4% after falling by 1.3% back in February.
    Imports, meanwhile, printed a 20.3% year-on-year increase.
  • According to NBS, “the export of mechanical and electronic products increased by 15.1 percent, accounting for 58.1 percent of the total value of exports.”

China's Economy: Growth

China's Economy: InflationChina's Economy: Business Conditions

China's Economy: Trade

Putting it all together

China’s GDP expanded at a slower quarter-on-quarter pace in Q1. Year-on-year, however, China is on track to meet the PBoC’s target annual growth of around 6.5%.

There were also signs that China is shifting from an export-driven economy to one that’s driven more by domestic demand and a cyber-economy, as envisioned in China’s so-called “13th 5-year plan” for 2016-2020.

This can be seen in the increase in retail sales and the service sector being the main driver for growth in Q1. Although it’s also worth mentioning that Caixin/Markit and the NBS are conflicting since Caixin/Markit say that new orders and activity in both the manufacturing and service sectors were easing while the officials PMI numbers from NBS say they’re improving. Caixin/Markit’s PMI readings are still above the 50.0 stagnation level, though, so both the manufacturing and service sector are still growing, albeit at a slower pace.

As for inflation, China does have a problem with headline inflation, thanks to the persistent and large slumps in food prices, particularly fresh vegetables. Getting to within the PBoC’s 3% inflation target seems rather unlikely presently. But on a more upbeat note, food prices are stripped from the core reading, so underlying inflation recovered after weakening previously.