JPMorgan says Chinese consumers are in ‘moderately good form’ despite miss in retail sales

The buying energy of the Chinese client stays comparatively sturdy however uncertainty from the coronavirus pandemic nonetheless lingers, in accordance with Tai Hui, Asia chief market strategist at JPMorgan Asset Management.

China could have missed analysts’ expectations in June’s retail sales numbers, however Chinese consumers “are still in reasonably good shape,” Hui informed CNBC’s “Squawk Box” on Friday.

However, “I believe it is the patron sentiment that is been impacted by for instance, the very transient outbreak in Beijing final month,” he stated.

A “key issue” stays over whether or not Chinese residents are “feeling more comfortable” to journey domestically once more, Hui stated, pointing to elevated chatter surrounding subjects equivalent to summer time vacation bookings for Chinese vacationers domestically.

“We’re gonna see a little bit more signs of recovery in the consumer sector in the third quarter,” significantly when a number of the worst hit sectors and providers “come back online,” Hui stated.

His feedback got here on the again of information launched Thursday that confirmed weak consumption in China. Retail sales in June fell 1.8% on 12 months, lacking expectations for a 0.3% rise by economists polled by Reuters. June’s retail sales numbers adopted the two.8% on-year decline in May.

China economic system’s second quarter rebound

Commenting on the probability of a change in coverage stance by Chinese authorities following Thursday’s financial information, Hui stated: “I don’t think the authorities (are) going to swing from one end to the other in such a drastic manner.”

“If you listen to the National Bureau of Statistics, they’re still very cautious towards the second half outlook especially from the external demand perspective,” he stated.

Private manufacturing funding in China stays “pretty sluggish” attributable to uncertainty surrounding the coronavirus in addition to weak exterior demand, Hui stated.

Still, he acknowledged that areas equivalent to public infrastructure spending are “picking up.”

“I do think that the authorities are still very much mindful of the downside risk to the economy but obviously they don’t want (an) asset bubble or debt-fueled boom,” he stated.

From an financial administration perspective, “you do want to have sufficient liquidity for the economy especially when … there’s still a lot of uncertainties in the second half of the year from a global … economic perspective,” Hui stated.

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