What: The release of a raft of Chinese economic data today pointed to growth acceleration for the first time in three quarters after the government increased spending and allowed more lending to slow the property slump.
However, it should be borne in mind that the figures only showed slight increases over fairly muted expectations or forecasts. Low expectations are a result of a difficult transition by the Chinese government from rapid growth into a more sustainable service-based economy.
So What: As reported by Bloomberg news the economic data was as follows:
1. Second-quarter gross domestic product (GDP) rose 7.5% versus an expectation of 7.4%.
2. Year-on-year industrial production came in at 9.2% versus an expectation of 9%.
3. Year-on-year retail sales increased 12.4% versus an expectation of 12.5%.
Prior to the data release, the Aussie dollar was trading at US$93.58, before falling to US$93.35. Meanwhile, the major miners such as Fortescue Metals Group Limited (ASX: FMG), Rio Tinto Limited (ASX: RIO) and BHP Billiton Limited (ASX: BHP) were trading up 4.3%, 1.2% and 0.32%. All three stocks are trading marginally lower just one hour after the release of the figures.
Now What: In my opinion, while these figures are steady, they are still not convincing as evidenced by the muted market reaction. China had previously targeted growth of 7.5% as a minimum level, so in reality the economy is still flattening and may still require additional stimulus.
It should be noted that Warren Buffett has rarely if ever invested in a mining stock. He prefers to concentrate on companies that have some measure of control over pricing power. In the Australian sphere, those stocks with pricing power include Woolworths Limited (ASX: WOW), Telstra Corporation Ltd (ASX: TLS) and Wesfarmers Ltd (ASX: WES). They are highly sought dividend payers which are rightly preferred to the low interest rates on offer via bank deposits.
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