Chinese activity firms short term

Via Capital Economics today:

 Our China Activity Proxy (CAP) for May shows that growth edged up for the first time this year. This was due to a seasonal jump in passenger traffic around a national holiday. As officials continue their efforts to rein in credit risks, we think activity will slow again soon.

 Looking ahead, we think growth will slow again over the coming months. The base effect that boosted passenger traffic growth in May will have reversed this month, creating a drag on growth. And, stepping back, at over 6% y/y, growth in China is still above what we estimate can be sustained over the medium-term (4.5-5.0%). If that is right, a slowdown further ahead is inevitable too. (See Chart 7.)

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About the author

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.