OPEC Monthly Oil Market Report – September 2017
China’s economy started 2H17 on a softer note compared with that seen in 1H17. Export growth weakened
amid slower demand in Asia. Real estate activity slowed notably, housing sales were flat compared to last
year while housing starts declined. Overall, industrial value added slowed to 6.4% in July, with the slowdown
in the value added in manufacturing particularly pronounced. Meanwhile, private consumption remained
healthy, with real retail sales up around 10% y-o-y and car sales growth accelerating further.
remained healthy in July, with real retail sales up by 9.6% y-o-y (10% y-o-y in June)
and car sales growth picking up further after the earlier slowdown.
Real estate activity in the smaller cities remained flexible, fuelled by a still-accommodative housing policy.
However, it appears that a less expansionary overall monetary policy stance will weigh on housing sales in
Graph 3 - 24: Chinese GDP growth
Graph 3 - 25: Chinese GDP breakdown
eased slightly last month to 1.4% y-o-y in July of 2017, following a 1.5% rise in June. It was the
lowest inflation rate since April, as the cost of non-food slowed and the cost of food continued to fall. On a
monthly basis, consumer prices edged up by 0.1%, after declining 0.2% a month earlier and slightly below
estimates of a 0.2% rise. Although PPI inflation held steady at 5.5%, trend-wise it eased notably from 7.4% in
1Q17 to 5.8% in 2Q17, and we expect it to continue to ease in 2H17 as the spill-over of price increases in
the heavy industry into other sectors remains limited.
China's trade surplus
fell to $46.74 billion in July of 2017 from $48.61 billion in the same month a year
earlier, but remained above the market consensus of $46.08 billion. Exports rose by 7.2% from a year earlier
to $193.6 billion, down from June's 11.3% growth, while imports rose 11% to $146.9 billion, down from the
previous month's 17.2% gain. As to the export outlook, while global demand momentum has improved
recently, China’s export growth probably peaked in 3Q17, in real terms, and is likely to be more moderate in
2H17. Moreover, downside risks to exports remain, in particular in the area of US-China trade relations
following strong growth in Chinese exports to the US (a full 11% increase y-o-y in 1H17 and remaining solid
at 9% y-o-y last month). This, along with ongoing US-North Korea tensions, may trigger US trade
protectionist measures against China. The slowdown in China’s economy and imports will make things
difficult for the global economy. Europe and the US will continue to grow but, going forward, growth in the
developed world is unlikely to be strong enough to offset the cooling in China. Global trade growth peaked in
1Q17, when China’s import growth was at its strongest, and will ease in the second half of this year.
Sources: China's National Bureau of Statistics and
% change y-o-y
Net exports of goods and services
Gross capital formation
Final consumption expenditure
Sources: China National Bureau of Statistics and
% change y-o-y