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  • Emerging Markets Debt Daily

    China Growth Momentum Still Soft

    Natalia Gurushina ,Economist, Emerging Markets Fixed Income
    March 14, 2019

    China’s activity indicators show the need for additional policy support. Growth headwinds in Turkey still abound.

    The Chinese renminbi is under pressure today following the release of underwhelming activity prints for February, as well as reports that the meeting between President Donald Trump and President Xi Jinping will be postponed until the end of April. To be fair, some activity indicators started to show signs of life (production of cement and electricity, infrastructure investments). However, the overall growth momentum remained soft, industrial production disappointed, and the rate of unemployment unexpectedly jumped to 5.3%. So, the need for additional policy support is still there, but the presence of “green shoots” argues in favor of the targeted approach.

    The yearly industrial production decline in Turkey looked quite dreadful (down by 7.3% in January)—even though the indicator posted the first sequential increase in months, raising hopes that the worst might be behind us. Our main concern is the ongoing weakness in capital and intermediary goods, which points to more headwinds to growth. This, in turn, means that the central bank’s resolve to maintain a tight policy stance might get tested again in the coming weeks.

    A better than expected retail sales print in Brazil is unlikely to impact the central bank’s policy bias. The growth rate looked sluggish (1.9% year-on-year, well below the cyclical peak), and the labor market slack will continue to weigh on consumption going forward. On the upside, the low inflation environment bodes well for the real income growth, supporting the consensus expectation that the real gross domestic product growth will accelerate to 2.35% in 2019.


    PMI – Purchasing Managers’ Index: economic indicators derived from monthly surveys of private sector companies; ISM – Institute for Supply Management PMI: ISM releases an index based on more than 400 purchasing and supply managers surveys; both in the manufacturing and non-manufacturing industries; CPI – Consumer Price Index: an index of the variation in prices paid by typical consumers for retail goods and other items; PPI – Producer Price Index: a family of indexes that measures the average change in selling prices received by domestic producers of goods and services over time; PCE inflation – Personal Consumption Expenditures Price Index: one measure of U.S. inflation, tracking the change in prices of goods and services purchased by consumers throughout the economy; MSCI – Morgan Stanley Capital International: an American provider of equity, fixed income, hedge fund stock market indexes, and equity portfolio analysis tools; VIX – CBOE Volatility Index: an index created by the Chicago Board Options Exchange (CBOE), which shows the market's expectation of 30-day volatility. It is constructed using the implied volatilities on S&P 500 index options.; GBI-EM – JP Morgan’s Government Bond Index – Emerging Markets: comprehensive emerging market debt benchmarks that track local currency bonds issued by Emerging market governments.; EMBI – JP Morgan’s Emerging Market Bond Index: JP Morgan's index of dollar-denominated sovereign bonds issued by a selection of emerging market countries; EMBIG - JP Morgan’s Emerging Market Bond Index Global: tracks total returns for traded external debt instruments in emerging markets.

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