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US and Chinese Economies Are on Different Trajectories

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Chinese economy

On April 17, China (FXI) released several economic data points. The country’s first-quarter GDP growth of 6.4% surprised on the upside. Other indicators were also better than expected. China’s industrial production rose 8.5% YoY (year-over-year) in March. The analysts polled by Reuters expected 5.9% growth.

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Economic indicators

China’s March retail sales rose 8.7% YoY, which beat the expectations. The service sector also expanded and the index of services production showed increased 7.6% in March. The growth rate increased over the first two months of the year. Fixed-asset and real estate investments, which are a key pillar of the Chinese economy, also showed improved growth in March from the first two months of the year. The country’s fixed-asset data were in line with analysts’ estimates.

Before these data points, China’s manufacturing PMI and exports were also better than expected. While we have started to see some green shoots emerging in China (FXI), the US economic data (SPY) (GE) has been relatively soft after a strong 2018.

US data

The US March manufacturing output was unchanged on a yearly basis and fell 1.1% YoY in the first quarter. Despite President Trump’s frequent claims that the US economy is strong, several observers including Warren Buffett, Berkshire Hathaway’s (BRK-B) chairman, have pointed to a slowdown. Read Who’s Done It All? Buffett Might Not Agree with President Trump to learn more.

Apple (AAPL), Kraft Heinz (KHC), and Coca-Cola (KO) were among Berkshire Hathaway’s biggest holdings at the end of the fourth quarter. Berkshire Hathaway also holds stakes in airline companies like American Airlines (AAL), Southwest Airlines (LUV), Delta Airlines (DAL), and United Continental (UAL).

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