China: Robust growth in Jan-Feb – Standard Chartered

Analysts at Standard Chartered, suggest that their model indicates China’s growth at 6.8% y/y in January-February, on par with Q4-2017 growth as strong IP, services and fixed asset investment are among the key drivers behind the robust performance. In addition, they expect growth to trend lower in the rest of 2018 as trade growth normalises and deleveraging bites.

Key Quotes

“Our China nowcasting model puts GDP growth at 6.8% y/y in the first two months of Q1-2018, on par with Q4-2017 growth. It shows that China’s growth is still robust and driven by a broad-based rebound. Our estimate is based on 31 monthly time series covering industrial production, retail sales, prices, the financial sector, trade, interest rates and surveys.”

“The common factor produced by our model, which summarises the information available in all time series from Q1-2017 to Q1-2018, indicates a slight increase in the GDP growth rate for January and February.”

“Strong growth in the first two months was driven by a solid performance in industrial production, which grew by 7.2% y/y, compared with 6.2% y/y in December 2017. Retail services also grew by 9.7% y/y, versus 9.4% y/y in December. Fixed asset investment (FAI) increased by 7.9% y/y in January-February, compared with 7.2% by the end of 2017, with infrastructure and real estate investment remaining strong.”

“On trade, exports rose by 24.4% y/y while imports were up by 21.7% y/y, suggesting robust trade performance in the first two months of 2018, largely driven by strong external and domestic demand. CPI inflation also picked up: headline inflation rebounded sharply to 2.9% y/y in February from 1.5% y/y in January, and food prices rose to 4.4% y/y in February, ending a 12-month streak of deflation.”