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Friday, January 11, 2013

Nomura on China: Expect 8% Year-over-year growth in Q4

by Calculated Risk on 1/11/2013 04:21:00 PM

From Wendy Chen at Nomura:

After slowing for seven straight quarters, we expect China's GDP growth to rebound to 8% in Q4 2012.

We expect real GDP growth to rebound to 8.0% y-o-y in Q4 from a low of 7.4% in Q3, underpinned by accommodative monetary and fiscal policies, inventory destocking coming to an end and a modest improvement in exports. Industrial production growth is likely to rise to 10.6% y-o-y in December from 10.1%, as a return to more normal inventories lifts production. We expect fixed asset investment to rise slightly to 20.8% y-o-y (ytd) in December from 20.7% in November, driven by infrastructure investment and possibly real estate investment. We expect retail sales to grow by 15.6% y-o-y in December from 14.9%, aided by easier financing conditions and rising asset prices.
The China data releases are scheduled for next Friday.

It appears China's growth is picking up in the short term, but growth will probably slow again. Michael Pettis wrote last month: Three cheers for the new data?
I expected that politics would require a jump in growth over the rest of this year and the beginning of the next, this “good growth” tells us nothing about the health of the underlying economy. It only tells us how difficult politically the transition is likely to be.
Growth rates in China will continue to slow dramatically in the next few years, and if there are temporary lulls, as there must be, these do not represent any sort of “bottoming out” at all. They simply represent the fact that Beijing cannot afford politically to allow the adjustment to taker place too quickly, and from time to time Beijing is are going to step on the investment accelerator to speed things up temporarily.