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Data Flash is a brief interpretive summary of China’s official monthly economic data release.
Last Wednesday, the NBS reported that official GDP growth for the second quarter came in at 7 percent y-o-y, unchanged from the first quarter’s growth rate. Frankly, the headline growth print is suspect. As we similarly highlighted in the first quarter of this year, the disconnect between the topline GDP print and underlying economic data is becoming increasingly pronounced. Indeed, second quarter y-o-y growth in industrial production, consumption, investment, and construction were all below the rates seen in Q1, and yet the headline number stayed even.
The NBS explanation is that services growth--especially financial services as the A-share market boom continued through most of the second quarter--took up the slack from poor performance by industrials and manufacturers. Still, while we can observe some sequential acceleration from May to June across a broad range of indicators, we caution MNCs to be increasingly circumspect in plugging headline numbers into business planning assumptions for China.