🇨🇳❗️Cable FX Macro Weekly Note: China Q3 GDP Growth

**As seen in Risk In The Week report 10/13/23, subscribe at cablefxm.co.uk/reports

Second quarter GDP growth eased sharply as economic growth expanded by 0.8% Q/q from the prior 2.2%, the figure was in line with estimates. On a yearly basis, output rose by 6.6%, the consensus median had seen a 7.1%, this left the first half of the year rising by 5.5% vs the expectations of 6.1%. Industrial output rebounded in June from the weakness seen in May, while retail sales eased to 3.1% in June from a prior 12.7%. Residential property sales declined sharply to a YTD 3.7% Y/y from a prior 11.9%, and property investment contracted by a YTD 7.9% Y/y. China's property investment has been contracting every month since April 2022. More recently, we have seen a rebound in August industrial production, output rose by 4.5% Y/y, up from a prior 3.7%, this was above the median survey of 3.9%. August retail sales surprised to the upside at 4.6% Y/y vs the estimate of 3.0%. Any continuation of upside surprises will likely be interpreted as a bottom to the 2Q softness and positive filtering from policy easing. Back in September, the PBOC lowered its RRR by 25bps to 10.50%, we’re set to receive 1-year MLF rate decision on Monday, and analysts’ desks see a 10bps cut to 2.40%.

Given an uptick in both NBS and Caixin PMI manufacturing output, analysts at J.P. Morgan expect the September industrial production figure at 4.1% Y/y, this is lower than the consensus, the monthly metric is penciled at 0.6% which will be sharply lower than the prior 1.8%. J.P. Morgan anticipates the growth-stabilization measures to be reflected in the economy over the coming months, they noted that policy initiatives have been incremental since mid-August. For Q3, J.P. Morgan pencils output growing at 5.1% Y/y and 5.3% Q/ q, they now see growth at 5.0% for 2023 and 4.4% for next year. Last week, investors were surprised to receive news that China is willing to increase its bond issuance in a step of providing support to the economy, however, analysts at Societe Generale said this looks like another measure and that the USD/CNY rate showed this is not a decisive action. Economists at Natixis said that the increment in the Chinese bond issuance is likely to push the PBoC to cut the RRR by 25bps to cater to the demand as banks are the biggest buyers of sovereign bonds