4 May 2015
China April data preview: CPI and exports to rise – Nomura
FXStreet (Barcelona) - Asian Economists at Nomura, preview the key Chinese data releases in April, forecasting a dip in industrial growth, and improvements in CPI inflation and export growth, and maintain their expectations for three 25bp cut in benchmark rates and 50bp of RRR cut in this year.
Key Quotes
“The better output sub-index suggests stronger sequential activity, but due to the high base effect, we expect industrial production growth to dip to 5.4% y-o-y in April from 5.6% in March and fixed asset investment growth to edge down to 13.4% y-o-y (ytd) from 13.5%, while retail sales growth may improve slightly to 10.6% from 10.2%, partly due to rising inflation.”
“We forecast an increase in CPI inflation to 1.6%% y-o-y in April from 1.4% in March, mainly driven by food prices.”
“For producer prices, we expect deflation to remain at 4.6% y-o-y in April, unchanged from March.”
“The People Bank of China loosened policy further on 19 April with a 100bp slashing of the bank reserve requirement ratio (RRR), which may have an impact on money and credit supply during the month. We expect both money supply and credit data to rise slightly in April, with M2 growth edging up to 11.7% y-o-y from 11.6% in March, and RMB new loans and aggregate financing up to RMB1.0trn and RMB1.2trn, respectively.”
“In terms of trade data, we expect export growth to rise to 2.5% y-o-y in April after a 15% plunge in March and the contraction in imports to worsen to 19.0% y-o-y from 12.7% due to weak domestic demand.”
“We maintain our forecast of GDP growth slowing to 6.6% y-o-y in Q2 from 7.0% in Q1, and more policy easing with three more 25bp benchmark rates cuts and two more 50bp RRR cuts over the remainder of 2015.”
Key Quotes
“The better output sub-index suggests stronger sequential activity, but due to the high base effect, we expect industrial production growth to dip to 5.4% y-o-y in April from 5.6% in March and fixed asset investment growth to edge down to 13.4% y-o-y (ytd) from 13.5%, while retail sales growth may improve slightly to 10.6% from 10.2%, partly due to rising inflation.”
“We forecast an increase in CPI inflation to 1.6%% y-o-y in April from 1.4% in March, mainly driven by food prices.”
“For producer prices, we expect deflation to remain at 4.6% y-o-y in April, unchanged from March.”
“The People Bank of China loosened policy further on 19 April with a 100bp slashing of the bank reserve requirement ratio (RRR), which may have an impact on money and credit supply during the month. We expect both money supply and credit data to rise slightly in April, with M2 growth edging up to 11.7% y-o-y from 11.6% in March, and RMB new loans and aggregate financing up to RMB1.0trn and RMB1.2trn, respectively.”
“In terms of trade data, we expect export growth to rise to 2.5% y-o-y in April after a 15% plunge in March and the contraction in imports to worsen to 19.0% y-o-y from 12.7% due to weak domestic demand.”
“We maintain our forecast of GDP growth slowing to 6.6% y-o-y in Q2 from 7.0% in Q1, and more policy easing with three more 25bp benchmark rates cuts and two more 50bp RRR cuts over the remainder of 2015.”