Inflation (both CPI and PPI) MoM growth may rebound in July, though YoY growth will likely remain flat. High-frequency data show a rebound in agricultural product prices in July. Graduation-season rental demand will likely drive up housing rents. We expect CPI in July to rise seasonally MoM and grow 1.5% YoY, flat with the YoY growth in June. Ferrous, nonferrous metals and energy prices all rebounded in July. We expect PPI in July to rise 0.2% MoM (-0.2% in June) and 5.5% YoY (+5.5% in June).

Headline economic activity growth may slow moderately in July compared with June. There was one more working day in June than last year, which benefited economic activity growth in June. In particular, the Dragon Boat Festival fell in June last year but in May this year, leading to a more significant impact.

Although high-frequency data show increased coal consumption by power plants, the increase in power demand was largely driven by higher temperature. Extreme hot weather in southern China may dampen industrial production. We expect growth of industrial value-added in July to slow to 7% YoY (7.6% in June).

We expect fixed asset investment growth in January~July to remain stable at 8.6% YoY (8.6% in January~June).

Retail sales in June benefited from e-commerce promotions around June 18. We expect retail sales growth in July to moderate to 10.8% YoY (11% in June).

Exports and imports may maintain fast growth. Export and import growth in June also benefited from more working days. But export and import growth in July may remain largely stable considering a low base effect. We expect exports in July to grow 11% YoY (+11.3% in June), imports to grow 16% YoY (+17.2% in June), and trade surplus to expand slightly to US$47bn (US$42.8bn in June).

M2 growth may pick up in July. Bond issuance continued to rebound in July. The net issuance of local government bonds reached Rmb 754bn, a YTD high; the issuance of corporate bonds also further increased compared with June. As of last Friday (July 28), the PBoC has injected a net Rmb472.5bn into the market through OMO this month, mainly to offset the impact of an increase in fiscal deposits. We expect loans to increase Rmb800bn in July (+Rmb1.54trn in June), total social financing to increase Rmb1.1trn (+Rmb1.78trn in June), and M2 growth to pick up to 9.7% YoY (9.5% in June). The dollar index has fallen 1.8% in July, which will boost the dollar value of China’s FX reserves. The renminbi has appreciated 0.6% against the US dollar in July – the recent trend of CNY appreciation vs. the USD may continue to ease FX outflow pressures. We expect China’s FX reserves to increase US$18bn in July to US$3.07trn.

Overall financial conditions continue to stabilize. China’s economic growth in 1Q17 and 2Q17 was better than expected, showing resilience in aggregate demand growth. Although industrial production growth in July may moderate compared with June, we expect new loans and total social financing in July to be stronger than the usual seasonal pattern dictates. Meanwhile, M2 growth may rebound strongly on a sequential basis. Market interest rates have fallen from high levels since June and remained largely stable in July. We expect monetary policy to stay prudent in 2H17, and financial conditions to remain largely stable – since financial regulation will likely be better coordinated among different agencies.