Commentary
China released a series of May economic data; all are better than expected and some show improvement from the previous month. But a month’s change right after massive lockdown is certainly not confirming a change of downtrend (to flat or up). Whether there will be a structural change is hard to judge simply from the latest trend. After all, economic data are not market data where technical analysis applies. Although a worsening economy will “ultimately” mean reverting and bottoming out, it is not easy to tell in advance from individual data series.
However, there could be some hints when related times series are viewed in combinations. From the released headline data for example, the gap between retail sales (RS) and industrial production (IP) growth rates gives the excess demand (with respect to supply). The difference in broad and narrow money (M2, M0) growth rates measure the multiplying effect of repeated deposit creations. The gap between consumer price index (CPI) and producer price index (PPI) growth rates captures firms’ profits, while that between exports (EX) and imports (IM) reflects the nation’s profits from the rest of the world….