China's GDP meets consensus forecast with 7.5% growth

Its second deceleration in a row.

According to UOB, China's headline real GDP growth came in at 7.5%y/y, matching precisely the consensus (and UOB's) call of 7.5%y/y, though this the second straight deceleration, after slowing to 7.7% in 1Q13 from recent peak of 7.9% in 4Q12.

The quarterly momentum though shows even more apparent deceleration, at 1.7%q/q seasonally adjusted, below expectation of 1.8% but higher than the 1.6% pace in 1Q13, matching the performance in first half of 2012 when “hard landing” fears were widespread.

Here's more:

These are slowest q/q figures recorded for China since data became available in 2011. Annualized, China’s growth rate has slowed to 7% in 2Q13 and 6.6% in 1Q13, which is likely to be truer to the actual condition.

Also released today is the industrial production data for June, which slowed to 8.9%y/y in June vs. expectation of 9.1% and 9.2% in May, and at the slowest in four months despite lower base last year.

Not surprising, investment activities decelerate to 20.1% YTD, from 20.4% in May and the slowest in more than a year. Retail sales though fared better at 13.3%y/y in Jun, the strongest in 4 months, vs. 12.9% gain in May.

However, we do note weaknesses in data released earlier.

Exports in Jun declined 3.1%y/y, way off expectations of +3.9%y/y, partly due to the clamp down in misreporting by exporters, and also a reflection of the state of true external market demand. Traditionally, mid year to 3Q is the stronger months for external demand, as exporters begin to fill year-end orders.

Apr-Jun 2013 exports growth averaged only 4.2%y/y, despite a low base of 10.4%y/y in 2012 - when China was heading towards “hard landing” phase and with political turmoil during that period.

This is well below the average, for the 2001 to 2012 period, when 2Q period saw exports growth of close to 21%y/y on average, which already includes down periods of 2001 (tech bubble, average +4.7%y/y), 2008 (global financial crisis, average -23.5%y/y), and 2012.

Average imports growth for 2Q13 is 5.3%y/y, despite a low base of 6.4% average in 2Q 2012, and is way below the average run rate of 20.6%y/y from 2001 to 2012.

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