01-19-2016, 07:26 AM
Some sensible stuff from Marctomarket:
China's data in the coming week is unlikely to have much market impact. The Bloomberg consensus is for steady growth in industrial output at 6.1% year-over-year pace. The risk is on the downside, but even a high 5% reading would be the envy of most countries. The consensus expects retail sales to accelerate to 11.3% year-over-year from 11.2%. Note that in the three months before the August plunge of Chinese shares, retail sales rose at an average pace of 10.4%. In the three months since the pace has quickened to 11%. The other data highlight is China's Q4 GDP. The consensus is that the economy expanded at a 6.9% year-over-year. It is expected to be the third quarter that China recorded a 1.8% quarterly expansion.
Many disparage the accuracy of Chinese data, which often seems quickly tallied, without the volatility that other countries show, and sometimes seemingly self-serving. However, critics often do this is by innuendo and accusations, not a robust examination. In this context, we note the San Francisco Fed report in 2013 that found that: "These alternative domestic and foreign sources provide no evidence that China’s economic growth was slower than official data indicate." Of course, this is not a comprehensive study and it covers only a short period. Still, it is suggestive. We also note that China has agreed to adopt the more robust data regime offered by the IMF. Lastly, in comparison, reporting data and then revising it ad nauseum for years, which is what many countries including the US, do, might not, at any one point, be providing more accurate data, which ought not be confused with the latest revision.
Week Ahead: What Will It Take to Stabilize the Capital Markets? | Marc to Market
And then some more about the US and Europe:
Nevertheless, the talk of a recession is an exercise in hyperbole. In December, the US reported its strongest job growth of the year. Simply, if crudely stated, the US does have a recession with such a pace of jobs growth and with a 5.0% unemployment rate. Something has to give, and we suspect Q4 will prove to be an anomaly. Remember the argument that one of the benefits of flexible capital markets is that the price of money can act as a shock absorber so the real economy doesn't. Perhaps QE compromised the ability of the capital markets to function accordingly, and as a result, the economy has become more volatile. On the other hand, the eurozone flash PMIs are expected to show that growth has remains remarkably steady. The composite has been between 53.3 and 54.3 since last February.
Week Ahead: What Will It Take to Stabilize the Capital Markets? | Marc to Market