China: Slower Q1-18 growth? – Standard Chartered

Analysts at Standard Chartered suggest that their model indicates China’s growth of 6.6% y/y in Q1-2018, down from 6.8% in Q4-2017 as March data implies softening growth, despite a strong performance in January and February.

Key Quotes

“Our China nowcasting model puts GDP growth at 6.6% y/y in Q1-2018, down from 6.8% in Q4-2017. Our model shows that growth softened in Q1 despite a strong performance at the turn of the year, largely driven by Lunar New Year (LNY) distortion. Our estimate is based on 13 monthly time series covering prices, the financial sector, trade, interest rates and surveys.”

“The official manufacturing PMI rebounded in March to 51.5 from 50.3 in February, reflecting a recovery in real activity after the Lunar New Year. However, average PMI readings in Q1-2018 appear to have been weaker than in Q4-2017, suggesting solid but softer growth at the beginning of the year. CPI inflation edged up to 2.1% y/y in Q1 from 1.8% in Q4-2017, mainly due to a return of food inflation. PPI inflation eased to 3.7% y/y in Q1 from 5.9% in Q4-2017 largely due to a high base.”

“Trade performance remained solid in the first quarter. Export and import growth accelerated to 14.0% y/y and 18.9% y/y in Q1, respectively. Credit growth slowed significantly as the government has identified deleveraging as a top priority. While loan growth remained high at 12.8% y/y in March, total social financing growth fell further to 10.5% y/y from 11.2% in February. Our nowcasting result echoes our view that Q1 GDP likely moderated from Q4-2017.”