Weak Economic Data Begets Monetary Easing

Posted by: : Paul EbelingPosted on: December 14, 2014 Weak Economic Data Begets Monetary Easing

Weak Economic Data Begets Monetary Easing


The relatively weak economic data released Friday have made it more likely that China’s policymakers will take more easing measures, according to a Deutsche Bank (NYSE:DB) economist.

The remarks were made by Zhang Zhiwei, chief China economist of Deutsche Bank, after China’s the National Bureau of Statistics published weaker industrial output, investment and retail figures for November.

China’s industrial output grew 7.2% Y-Y in November, the 2nd lowest since April of 2009, with only August of this year reporting a lower rate.

Industrial production accounted for 44.2% of China’s total GDP in the 1st 9 months of Y 2014, making it 1 of the best leading indicators for GDP growth.

“Without significant policy easing, the weak momentum in the economy will likely persist,” said Zhang in a research note sent to media.

In Q-3, growth slid to a low of 7.3%, a level not seen since the Ys 2008/2009 global financial crisis, dragged down by a housing slowdown, softening domestic demand and unsteady exports.

The data showed this month that investment, especially in the property sector, continued to slide, with leading indicators such as new starts and land sales weakening further.

“This data suggests to us that developers’ outlook for the sector remains cautious, hence we may not see a sustainable recovery in investment, at least in 1-H of Y 2015,” Zhang said.

The economist expects the Chinese government to cut the reserve requirement ratio (RRR) by 50 bpts in the 1st and 2nd Quarter of Y 2015, and further cut interest rates later in the year.

The PBOC cut the benchmark interest rates in late November, the first such move in more than 2 yrs.

Have a terrific week.


Paul Ebeling

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Paul Ebeling

Pattern Recognition Analyst, equities, commodities, forex
Paul Ebeling is best known for his work as writer and publisher of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly-regarded, weekly financial market letter, where he enjoys an international audience among opinion makers, business leaders, and respected organizations. Something of a pioneer in online stock market and commodities discussion and analysis, Ebeling has been online since 1994. He has studied and worked in the global financial and stock markets since 1984.

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