This week saw the release of more economic data out of China and the signs were not encouraging as all reports pointed to a slower Chinese economy than anticipated. This sparks global economic growth concerns and had a direct impact on forex markets. Commodity currencies such as the Australian Dollar, the New Zealand Dollar and the Canadian Dollar are dependent on strong economic data out of China.
Efforts by the Chinese economy to reduce liquidity in the Chinese financial system continue to pressure the economy. New Yuan loans for February were reports at CNY644.5 billion. This was a more severe slowdown than economist have expected as estimates were for a CNY730.0 billion figure. January’s loans were more than twice as high at CNY1,320.0 billion. Aggregate Financing experienced an even bigger slowdown and was reported at CNY 938.7 billion. Estimates called for a slowdown to CNY1,312.9 billion while January’s figure was revised upward to CNY2,584.5 billion.
Chinese Exports slumped an unexpected 18.1% which took traders by surprise. Economists expected exports to slow down to 7.5% from January’s 10.6%. Imports rose 10.1% which came on the back of higher energy needs while the Chinese consumer did not spent as much as expected. The combination of a surge in imports and a plunge in exports left China with a February trade deficit of $22.98 billion. Economists called for a trade surplus of $14.50 billion.
Chinese industrial production also disappointed traders which missed growth estimate of 9.5%. The report showed industrial production rose 8.6% in February. January’s 9.7% expansion remained unrevised. Adding to economic disappointments out of China was retail sales data which came in at 11.8%, missing estimates for an increase of 0.4% from the previous month to 13.5%.
A slower than expected Chinese economy could suggest economic weakness around the globe while the Australian Dollar as well as New Zealand Dollar, which enjoyed rallies over the past two trading session on the back of strong economic data, may experience and increase in volatility.