China reported Q4 GDP of 8.9% last night.
It was the weakest number in 2.5 years, but… it nicely topped analyst forecasts of 8.7%.
And there are signs that the domestic, non-construction economy is picking up the slack from slowing fixed asset investment, which is crucial.
Here’s Nomura.China’s real GDP growth in Q4 was 8.9% y-o-y, slightly lower than the 9.1% in Q3 (Nomura: 8.6%, Consensus: 8.7%). According to official estimates, China maintained robust quarter-on-quarter growth at 2.0% in Q4, following 2.3% in Q3. Although China cannot escape the negative impact of global market turbulence emanating from Europe, continued strength in domestic demand is a sign that its economy is still on a soft-landing path. Major economic activity indicators in December were encouraging: Although growth in urban fixed asset investment slowed to 23.8% y-o-y (ytd) in December from 24.5% in November (Nomura: 24.0%, Consensus: 24.1%), industrial production growth picked up to12.8% y-o-y in December from 12.4% in November (Nomura: 12.2%, Consensus 12.3%). Retail sales growth in nominal terms rose to 18.1% y-o-y from 17.3% in November (Nomura: 17.2%, Consensus: 17.3%).
We believe that lower inflation over recent months contributed to an improvement in consumer sentiment through higher real incomes and to corporate sentiment through lower costs. We also recognise that production and consumption may have been front- loaded in December due to the effects of an unusually early Chinese New Year this year, which falls on 23 January.