China: Economic indicators head north in March - NAB

Gerard Burg, Senior Economist at NAB, notes that the China’s economic growth edged a little lower in the first quarter of 2016 – at 6.7% yoy (down from 6.8% in Q4 2015).

Key Quotes

“Services remain the key driver – contributing around 58% of the growth in Q1. Our forecasts for China’s economic growth remain unchanged, at 6.7% for 2016 and 6.5% for 2017.

China recorded stronger growth in industrial production in March – up to 6.8% yoy (from 5.4% previously). This was the strongest rate of growth since June 2015, and was well above market expectations. Construction related heavy industry saw notable pick ups.

China’s fixed asset investment continued to strengthen in March – with growth at 11.1% yoy – well above market expectations. A recovery in real estate investment was a key driver – which was mirrored by a pick up in new construction activity in early 2016. Residential construction starts grew by almost 15% yoy in Q1 – having recorded declines across the majority of 2015.

China’s trade surplus was narrowed in March, as imports recovered more strongly than exports from the Chinese new year lows. Commodity import volumes were considerably stronger in March (again likely tied to construction activity)– compared with very mixed conditions across the latter part of 2015.

China’s new credit expanded by almost 42% yoy in the March quarter – to RMB 6.6 trillion. This was driven by a record monthly increase in January (RMB 3.4 trillion), along with particularly strong growth the month of March (RMB 2.3 trillion). This is piling further debt on China’s already high levels – estimated at around 308% of GDP at the end of 2015.”