The week started optimistically as growth appeared to re-emerge in China. This also raised concerns domestically, why?

China

GDP data released last week for China showed improvement over the prior quarter. Annualized GDP grew at 6.4%. Major areas of strength were industrial production and consumer spending. China implemented stimulus measures during the first quarter that appear to be paying off. Their growth projects for 2019 are between 6% and 6.5%.

US

Manufacturing remained unchanged in March, coming in at 52.4. Meanwhile services showed a slowing, but expansionary figure, coming in at 52.9. 50 marks the difference between contraction and expansion. Big news for the US was an unexpected increase in retail sales for March, rising 1.6%. This increase could spell good news for Q1 GDP, considering reduced expectations from the government shutdown, this is a great news.

Japan

Trade has been a sticky point for Japan since the start of the trade war between the US and China. You read that right. Trade with China has fallen since and trade with the US has actually expanded, 9.8% annualized in March.

EU

The EU has had a strong start to earnings season. This is good as the outlook for the coming quarter is not as rosy. The impact of a global slow down has damaged growth in the region. Manufacturing has improved but remains contractionary and Services slipped but remained expansionary.

Conclusion

There has been much optimism about the trade war over the last 3 months. It appears that a deal is on track to be completed by the end of May. The concern is that if the improved economic outlook in China provides them with a stronger negotiating stance, that sends parties back to the drawing board this late in the process. This is unlikely, as such an action would likely erode consumer confidence in either country. Yet, it is a concern none the less.

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