ECONOMIST: The Street Will Raise Its China Q3 GDP Forecasts After Today's PMI Report

HSBC China flash PMI climbed to a 4-month high of 50.1 in August. This showed that manufacturing is expanding again.

After a string of weak economic data earlier this year, economists had begun to slash their GDP forecasts for the Asian giant. Bank of America’s Ting Lu now expects Street economists to start boosting their Q3 GDP forecasts.

“We are confident to maintain our above-consensus 7.6% and 7.5% yoy growth forecasts for 3Q and 4Q (a sequential recovery to 1.9% QoQ in 2H from 1.7% in 2Q). We also expect further improvement in both HSBC and NBS/CFLP PMI in coming months. Many Street economists will likely to revise up their overly pessimistic 3Q GDP growth forecasts soon. We are confident to maintain our 7.6% yoy GDP growth forecasts for 3Q and 7.5% for 4Q.

“At present, Premier Li will continue his current pro-growth policies featured with a mini fiscal stimulus for rail and urban FAI, tax cuts and no monetary tightening until he feels confident that growth in 2H13 will be around 7.5%. That said, good data in July and August also means that markets should not expect a big stimulus package.”

He also said the breakdown of the report showed that this was driven by an improvement in domestic demand, rather than external demand. And that we’re starting to see the impact of the Li Keqiang put. Premier Li Keqiang said would be the growth floor for 2013.

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