Chinese retail sales and industrial production likely to have eased in October

In October, Chinese domestic demand is likely to have eased further. The retail sales data for the month of October is set to be released this week. According to a DBS Bank, retail sales growth is expected to have eased to 9 percent year-on-year from 9.2 percent. Similarly, industrial production is also expected to have moderated to 5.5 percent in the month.

This greatly shows the continued contraction in new export order component of the official manufacturing PMI, due to deepening trade frictions. Fixed asset investment is expected to have rebounded slightly to 5.6 percent in October alongside an accommodative monetary policy.

“Looking ahead, the 100 bps cut of RRR effective in October should release further liquidity to support growth. The PBOC will also likely offer more longer-term cash via MLF to cope with the deterioration of corporate and local government cash flow”, stated DBS Bank.

These will in turn raise the monetary supply. The authority also announced new policy initiatives to encourage bank’s lending activities. New increase in aggregate financing should steady in the coming months. Yet, the government has spared no effort in the controlling the financial risk by shifting the shadow banking product bank onto the book.

“In fact, off-balance sheet products should continue to fall after shrinking for 7 months in a row”, added DBS Bank.

At 19:00 GMT the FxWirePro's Hourly Strength Index of Chinese yuan was highly bearish at -117.496, while the FxWirePro's Hourly Strength Index of US Dollar was highly bullish at 123.166. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex