China's Data Dump Had 2 Puzzling Details

GDP growth decelerated to 7.5% in Q2 from 7.7% in Q1.

"Overall, signs of any meaningful recovery in China’s domestic demand remained limited, but the degree of deceleration is probably still acceptable to the new leadership," said Societe Generale's Wei Yao.

But as usual, China's data dump had a some head scratchers in the details of its trade and inflation numbers. From Yao:

However, there are several puzzling details to us. First, the year-to-date contribution of gross capital formation rebounded strongly to 4.1ppt from 2.3ppt in Q1 and also a touch higher than the 4ppt in Q2 2012, which nearly offset the 1ppt decline in the contribution from net exports (0.1ppt ytd). Second, nominal GDP growth decelerated much more sharply from 9.6% in Q1 to 8%, as the deflator increased just 0.5% yoy (1.7% yoy in Q1). We find this deflator somewhat too low given the monthly inflation data published over the quarter. In comparison, Q4 2009 had much lower CPI, similar PPI, lower export price inflation and higher import price inflation, but yet the GDP deflator was significantly higher at 1.4% yoy.

China unfortunately has a poor reputation for producing consistent data. But experts note that its the trends that matter. And the trend is clearly pointed downward.