BoA / Merrill Lynch on the China LEAP (leading economic activity pulse)
- Rebounded to -3.1% in August
- Was -4.1% in July
(Yes, both are negatives .... with August not quite so negative as July :-D )
- Mainly driven by improvement in production of raw materials and auto sales
- Suggesting the risks of a near-term hard landing could be small
- Still, the LEAP reading is quite negative
- & other August activity data are mixed, indicating that the real economy could be facing bigger downward pressures
(BoA/ML conclusions on what sort of stimulus will be forthcoming in China is no different to what I summarized here, so I won't repeat it)
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More on the LEAP from BoA/ML:
The majority of the seven LEAP components improved in August from July
- On the demand side, housing starts further declined to -17.6% yoy in August after dropping 16.4% in July. We think destocking could still be ongoing in tier 3-4 cities. But as housing market continues to recover, we expect to see some improvement in housing starts and FAI soon. Auto sales growth rebounded to -3.0% from -7.1%
- On the production side, the output growth of power, steel and cement all increased, partly helped by a low comparison base last August
- Medium- to long-term loan growth edged down to 14.6% from 14.8%, but if adjusting for local government debt swap (as about a half of the new bonds could be used to replace existing bank loans), it actually rose by 0.2pp