For weeks, China has released a string of encouraging data that suggested China’s economy was accelerating once again.And last night’s round of data seems to have finally put fears of a hard landing to rest.
“Overall, the latest activity data was quite positive, which puts upward pressure on our current growth forecast of 7.7%yoy for Q4,” wrote Societe Generale economist Wei Yao. “The Chinese economy is undoubtedly heating up.”
Here’s a roundup of the year-over-year November data from China’s National Bureau of Statistics:
- CPI: +2.0% (Consensus +2.1%, Previous +1.7%)
- PPI: -2.2% (Cons. -1.9%, Prev. -2.8%)
- Industrial Production: +10.1% (Cons. 9.8%)
- Fixed Asset Investment: +20.7% (Cons. 20.8%, Prev. 20.7%)
- Retail Sales: +14.9% (Prev. +14.5%)
“[W]ith rebounding GDP growth, rebounding earning growth and low inflation, we could claim that the Chinese economy is now in a sweet spot and can stay in the sweet spot through 1H13,” writes Bank of America Merrill Lynch economist Ting Lu. “The current macro backdrop should bolster asset prices from equities to commodities. Surely China’s currency will also be supported, though the PBoC may intervene more to cap the rising momentum of RMB.”
Lu however more cautious about the second half of 2013.
“But we warn the need for precaution as economic growth could moderate and inflation could pick up in 2H13,” he writes. “And by mid-2013 people may get more worried about side-effects of policy easing such as government debt and shadow banking.”
China’s government will be setting its official economic targets fro 2013. Here’s SocGen’s Yao:
“Policymakers will meet at the Central Economic Work Conference (CEWC) in the next few days and set the economic targets for 2013. At the Politburo meeting last week – the prep meeting for the CEWC, the top leaders sounded more confidence in the growth momentum, reiterated to maintain prudent monetary policy, and emphasised the importance of the quality of growth as well as structural reforms. Hence, we expect no change in either the growth target of 7.5% or the cautiously supportive policy stance.”
We’ll be following that meeting closely.