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15 Apr 2015
Chinese GDP growth poised to drop below 7% - Danske
FXStreet (Barcelona) - Flemming J. Nielsen, Senior Analyst at Danske Bank, reviews today’s Chinese GDP data release, and further adds that the slowing industrial production to remains suggestive of a GDP growth below 7.0% ahead.
Key Quotes
“Data released in China overnight were weaker than expected. While GDP growth avoided slipping below the government’s 7% target in Q1 15, the weak data released for March suggest that GDP growth will drop below 7% y/y in Q2 15. Consequently, we revise our GDP forecast for 2015 as a whole lower to 6.9% from previously 7.2%.”
“With the government’s growth target already challenged, the implications are that there will be more monetary easing and probably also some additional fiscal easing. In the past month People’s Bank of China (PBoC) has shifted to more substantial easing by injecting more liquidity into the interbank market and allowing interbank interest rates to decline.”
“We still do not expect China to join the global currency war by allowing a more substantial depreciation of the CNY to support growth. The depreciation pressure on CNY eased over the past month and there has not been a substantial impact from the weak data released overnight.”
“Looking into the details GDP growth in Q1 15 eased to 7.0% y/y (consensus: 7.0% y/y, DBM: 7.0% y/y) from 7.3% y/y in Q4 14 and hence reached its lowest level since Q1 09. Seasonally adjusted GDP expanded 1.3% q/q (consensus 1.4% q/q, DBM: 1.4% q/q ) after expanding 1.5% q/q in Q4 14.”
“Growth in industrial production in March again slowed markedly to 5.6% y/y (consensus: 7.0% y/y, DBM 7.0 y/y) from 6.8% y/y for January and February as a whole. According to our own seasonal adjustment industrial production increased only 0.2% m/m in March after increasing 0.5% m/m in the previous month.”
“Industrial production remains our best indicator for GDP growth and at the moment it suggests that GDP growth will drop below 7% y/y in Q2 14.”
Key Quotes
“Data released in China overnight were weaker than expected. While GDP growth avoided slipping below the government’s 7% target in Q1 15, the weak data released for March suggest that GDP growth will drop below 7% y/y in Q2 15. Consequently, we revise our GDP forecast for 2015 as a whole lower to 6.9% from previously 7.2%.”
“With the government’s growth target already challenged, the implications are that there will be more monetary easing and probably also some additional fiscal easing. In the past month People’s Bank of China (PBoC) has shifted to more substantial easing by injecting more liquidity into the interbank market and allowing interbank interest rates to decline.”
“We still do not expect China to join the global currency war by allowing a more substantial depreciation of the CNY to support growth. The depreciation pressure on CNY eased over the past month and there has not been a substantial impact from the weak data released overnight.”
“Looking into the details GDP growth in Q1 15 eased to 7.0% y/y (consensus: 7.0% y/y, DBM: 7.0% y/y) from 7.3% y/y in Q4 14 and hence reached its lowest level since Q1 09. Seasonally adjusted GDP expanded 1.3% q/q (consensus 1.4% q/q, DBM: 1.4% q/q ) after expanding 1.5% q/q in Q4 14.”
“Growth in industrial production in March again slowed markedly to 5.6% y/y (consensus: 7.0% y/y, DBM 7.0 y/y) from 6.8% y/y for January and February as a whole. According to our own seasonal adjustment industrial production increased only 0.2% m/m in March after increasing 0.5% m/m in the previous month.”
“Industrial production remains our best indicator for GDP growth and at the moment it suggests that GDP growth will drop below 7% y/y in Q2 14.”