China Posts Q3 GDP Growth But Misses Forecasts

China Posts Q3 GDP Growth But Misses Forecasts
October 20, 2020

The Chinese Yuan rallied against the Canadian Dollar following the release of better-than-anticipated industrial production, retail sales and unemployment rate data. Notably, the Canadian wholesale sales data were slightly better than economist forecasts but were not convincing enough for the market to place its bet on the loonie. The yuan could have gained further against the Canadian dollar if China’s Q3 GDP data was higher than estimates. In the past 24 hours, the CNY/CAD pair gained 0.5% to trade at 0.1972.

Data published by China’s National Bureau of Statistics indicated that the country’s GDP increased 4.9% q-o-q in the third-quarter, quicker than the 3.2% growth in the second quarter, but below the 5.5% growth projected by China-based economists. The reported figures were also below the 5.2% growth forecast issued by Wind Information, a financial info database. It can be remembered that the country’s GDP contracted 6.8% in the first quarter of 2020, when over 50% of the country was under lockdown to contain the spread of Covid-19. The IMF (international monetary fund) anticipates China to expand at 1.9% in 2020, making it the only major economy to record GDP growth. Furthermore, the world’s second-largest economy has expanded 0.7% so far this year, compared with the similar period last year.

The statistical organization said “Generally speaking, the overall national economy continued the steady recovery and significant results have been delivered in coordinating epidemic prevention and development. However, we should also be aware that the international environment is still complicated. There are considerable instabilities and uncertainties, and we are under great pressure of forestalling epidemic transmissions from abroad, and its resurgence at home. The economy is still in the process of recovery and the foundation for sustained recovery needs to be consolidated.”

The country’s retail sales increased by 3.3% y-o-y in September, reflecting a 0.9% growth in the third quarter. Economists had anticipated retail sales to increase by 1.7% in the reported period. For the initial nine months of the year, the country’s retail sales shrank 7.2%. In August, retail sales grew 0.5% on y-o-y basis. The figures are significant in the sense that it gives a clear idea of consumption trends.

In separate news, urban surveyed unemployment rate decreased slightly to 5.4% in September, from 5.6% in the previous month, and a notch lower than the 5.5% growth anticipated by economists. The figures were calculated after avoiding February reading.

More importantly, industrial production (excluding February reading), grew 6.9% y-o-y in September, following an increase of 5.6% in the previous month, and higher than the 5.8% expansion forecast by economists. Including the reported figures, the aggregate growth in the first nine months is 1.2%. Fixed asset investment increased by 0.8% in the first three quarters of 2020.

In the US session, Statistics Canada stated that wholesale sales increased 0.3% m-o-m in August, following a 5.2% increase in the previous month and greater than the 0.1% growth anticipated by economists.

Wholesale sales increased in August, the fourth consecutive monthly increase. However, the rate of growth was slightly slower than the previous three months. In value terms, sales were $65.70 billion in August. In volume terms, wholesales sales rose 0.1% in August.

Wholesale sales increased 1.7% above pre-pandemic February levels. Four subsectors posted growth that were greater than in February, primarily driven by miscellaneous goods, building material and supply sales.

Subsectors that continue to perform below pre-pandemic February levels include motor vehicles and spare parts, food, personal and household goods, and beverage and tobacco. Notably, motor vehicles and spare parts sales recorded 2.5% rise in August, but remain 7.1% below pre-pandemic February levels.

The building material and supplies subsector posted a 7% increase in sales to $9.80 billion in August, a new record. It is the fourth successive month of growth. The increase was led by robust 12.2% growth of lumber, millwork, hardware and other building industry supplies. In value terms, the sub-sector recorded sales of $5.50 billion.

In the personal and household goods subsector, sales declined 3.1% to $9.60 billion, led by a drop in the pharmaceutical and pharmacy supplies sector, which dropped for the second month in a row in August.

The food, beverage and tobacco subsector decreased 2.4% to $12 billion in August, almost totally due to a 2.9% drop in sales to $10.40 billion in the food sector.

The upbeat Chinese economic data is expected to keep the CNY/CAD pair range-bound with a slightly bullish bias.

CNY - Technical Analysis - 20th October 2020

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.



Sammy is our forex expert, with over 20 years experience in the financial sector, she will be keeping you up to date with the ups and downs of currencies around the world

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