The immediate pressure may be off
China’s 3.2% y/y Q2 economic expansion has surprised both our and the consensus expectation. Indeed, it is a remarkable turnaround from the height of China’s outbreak in February and the 6.8% y/y contraction of Q1:20. It’s also starkly better than other leading economies.
Activity and spending data implies that y/y economic output had stopped contracting in May/June, and high-frequency data spells a further recovery in June. In addition, and importantly, the two-track recovery – a sharpish recovery in industry, followed by consumer/services sectors – has eased off as demand seems to also be making progress.