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  • Emerging Markets Debt Daily

    China’s Two-Speed Activity Indicators

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

    Trade tensions are clearly weighing on China’s industrial activity, but domestic consumption remains robust. Argentina’s inflation dynamics showed further improvements in May.

    China’s activity indicators for May showed that even though trade tensions are clearly affecting manufacturing and investments, consumption remains robust.
     Both fixed assets investments and industrial production undershot expectations, with yearly growth moderating to 5.6% year-to-date and 5%, respectively. However, the retail sales growth rebounded sharply to 8.6% year-on-year, beating consensus. Today’s data definitely argues in favor of more policy support, but authorities’ focus on financial stability suggests that it is likely to be “drip” rather than “bazooka” stimulus.

    Argentina’s yearly inflation prints continued to look terrifying in May—57.3% headline and 58.78% core—but the monthly dynamics are clearly improving. Monthly core inflation decelerated to 3.2% and the high-frequency data points to further normalization in June. We are currently in Argentina on a research trip, and most local experts expect headline inflation to moderate to circa 40% by the end of the year. Still, the central bank’s message is clear—it is not in a hurry to ease and nominal interest rates will remain relatively high for now, declining less than inflation.

    In Brazil, the pension reform rapporteur’s report showed a higher than expected estimate for 10-year fiscal savings, but some aspects were softened in order to boost the bill's prospects for approval. These included changes in rural pensions, the minimum contribution period for women and capitalization, among other things. States and municipalities were also excluded from the text, but they can be voted on separately as an amendment in the lower house. The inclusion of sub-nationals is important because it can amplify the reform’s longer term impact.


    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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