China's Q4 Economic Growth Slightly Below Forecast at 5.2%

Highlights

• China's economy grew by 5.2% year-over-year in Q4, slightly below the 5.3% forecast.
• Retail sales showed a decline in December, while industrial production data indicated an increase in manufacturing sector activity.
• The markets are anticipating a substantial stimulus package from Beijing to support the economy.

China: Plea for Enhanced Stimulus due to Economic Indicators

The Chinese economy took center stage on Wednesday as industrial production, fixed asset investment, retail sales, unemployment, and Q4 GDP figures attracted significant investor attention. Despite the economy expanding by 1.0% quarter-on-quarter in Q4 versus 1.3% in Q3, and by 5.2% year-over-year, the numbers fell short of the 5.3% forecast. Mixed signals were conveyed as December's retail sales rose by 7.4% compared to 10.1% in November, while industrial production increased by 6.8% versus 6.6% in November. With the unemployment rate unexpectedly rising to 5.1%, the softer growth may prompt Beijing to consider more substantial stimulus measures.  

AUD/USD Reacts to China's Economic Data

Before the release of the statistics, the AUD/USD dropped to a low of $0.65785 before climbing to a peak of $0.65931. Subsequently, in response to the Chinese data, the AUD/USD decreased to a low of $0.65879 before rebounding to a high of $0.65942. At the close of Wednesday, the AUD/USD had risen by 0.15% to $0.65937.

170124 AUDUSD 3 Minute Chart

What's next?: US Retail Sales and Fed Speakers in Focus

The upcoming release of US retail sales figures is expected to hold investors' attention, with reduced expectations for a March Fed rate cut adding significance to the numbers. A potential increase in retail sales could provide grounds for the Fed to postpone rate adjustments. Economists predict a 0.4% rise in December retail sales, compared to the previous 0.3% increase in November. Additionally, housing sector-related data and industrial production numbers are anticipated, although the primary focus will be on retail sales. Alongside the statistical releases, it is crucial to consider remarks from FOMC members Michele Bowman, Michael Barr, and John Williams, who are scheduled to address the economic outlook, inflation, and interest rates, all of which are critical topics for investors.