The Canadian dollar strengthened against the Chinese yuan yesterday following the release of overwhelmingly positive Canadian wholesale sales data for May. Earlier in the Asian session, the Chinese statistical institute published lower-than-expected GDP data for the second quarter. Furthermore, the retail sales data for June also missed estimates. Overall, the CAD/CNY pair gained 0.60% in the past 24 hours to trade at 5.4419.
According to China’s National Bureau of Statistics (NBS), on a y-o-y basis, the country’s economy grew by 6.30% in the second quarter, speeding up from 4.50% in the March 2023 quarter. However, the rate of growth missed economists’ forecasts of 7.30%. The annual rate was the steepest since 2Q 2021, but the figure is heavily one-sided as the pandemic caused huge stress on the economy due to lockdowns in Shanghai and other prominent cities in 2022.
Furthermore, China’s GDP inched up 0.80% in the April-June period, compared with the earlier quarter, as per data published by the National Bureau of Statistics. Economists had anticipated a growth rate of 0.50% for the reported period. In the previous quarter, China’s economy rose by 2.20%.
The country’s industrial production grew by 4.40% y-o-y in June, following a 3.50% increase in May, and surpassed forecasts of a 2.70% growth. Demand continues to be tepid amidst a volatile economic recovery following the COVID-19 pandemic.
NBS also stated that China’s retail sales rose by 3.10% y-o-y in June, following a jump of 12.70% in the previous month but missing forecasts of a 3.20% increase. Fixed asset investment grew by 3.80% y-o-y in the initial six months of 2023 and surpassed forecasts of 3.50% growth.
According to Statistics Canada, the country’s wholesale sales rebounded with a growth of 3.50% m-o-m in May to C$83.60 billion, following a decline of 1.40% in the previous month and greater than forecasts of a 1.10% increase. Sales in the machinery, equipment, and supplies subsector rose by 5.60% to C$18.90 billion in May.
The growth was led by the construction, forestry, mining, and industrial machinery, equipment, and supplies industry groups, with an increase of 6.90% to C$6.20 billion in May. Also, computer and communications equipment and supplies posted a rise of 6.30% to C$5.10 billion. The miscellaneous subsector grew by 8.80% to C$11.30 billion in May. Overall subsector growth was driven by a 26.10% growth in sales of agricultural supplies.
The motor vehicle and motor vehicle parts and accessories subsector rose by 7.10% to C$13.70 billion in May. However, wholesale inventories declined 0.20% to C$129 billion in May, reflecting the second decrease in 2023. Likewise, the building material and supplies subsector recorded a decrease of 2.40% to C$23.70 billion.
Overall, the inventory-to-sales ratio fell to 1.54 in May from 1.58. The upbeat Canadian wholesale sales data is expected to keep the CAD/CNY pair slightly bullish in the short term.
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