China: Growth slowdown story remains intact – Nomura

Analysts at Nomura suggest that based on detailed Q2 GDP breakdown data of Chinese economy which was released by the National Bureau of Statistics, they estimate the contribution from service sector to real GDP growth declined to 4.1 percentage points (pp) from 4.2pp in Q1, while that from primary and secondary sectors remained largely unchanged.

Key Quotes

“By industry, output growth in construction and property services sectors dropped by 1.4pp and 0.7pp, respectively, to 4.0% y-o-y and 4.2% in Q2, consistent with the recent slowdown in property investment and sales; that in wholesale & retail sales sector also slowed, by 0.2pp to 6.6% in Q2, likely weighted on by the rapid build-up of household leverage.”

“That said, we see a continued momentum building in new economy components.”

“We continued to expect a growth slowdown ahead, mainly due to headwinds from weakening end-demand, rising credit defaults, a problematic property sector, and escalating ChinaUS trade tensions.”