May data suggests weakening growth trajectory

The Conference Board’s Leading Economic Indicator (LEI) for China suggests strengthening growth in the near-term, mostly based on rising consumer confidence and strong industrial profit outlook. However, uneven component contributions to the headline reading warrant cautious interpretation.

Fixed Asset Investment (FAI) growth dropped to a record low in May. Economic policy is shifting toward supporting growth as opposed to supporting “de-risking”, but Beijing can’t abandon de-risking and braking credit growth altogether and, paired with the RMB devaluation pressure, it is unlikely that we will see major easing in the near-term.