Nomura client note on the China GDP, IP, retail sales, investment data … China Rebound in growth unlikely to be sustained (bolding is mine):
- China’s real GDP growth held stable at 7.3% y-o-y in Q4 2014 from Q3, in line with our expectation but slightly higher than consensus expectations of 7.2%
- This takes full-year 2014 GDP growth to 7.4%, slightly below the official target of 7.5%
- As we expected, in the higher-frequency monthly data there are nascent signs of a recovery in December, but this will prove short-lived in our view
Industrial production growth rose … as the disruptions from the factory shutdowns during the November APEC meeting have faded, and policy easing continues
Fixed asset investment growth edged down … Slower investment growth was led by the property and infrastructure sectors:
- Property investment growth slowed by 1.4 percentage points (pp) to 10.5% from 11.9%
- Infrastructure investment growth (excluding electricity) declined by 0.3pp to 21.5%, from 21.8%
- Manufacturing investment growth remained at 13.5% y-o-y (ytd) in December, unchanged from November
Retail sales strengthened, suggesting some progress in much-needed economic rebalancing from investment towards consumption
- Excluding the price effect, the improvement in real retail sales growth… perhaps buoyed by wealth effects from the strong equity market rally
We believe the economy will resume its downtrend after this short respite in December
- Continue to expect GDP growth to slow to 7.1% y-o-y in Q1 2015 given deep-rooted domestic challenges such as tighter controls over local government debt, the property market correction and deleveraging
- For 2015, we maintain our GDP growth forecast of 6.8%
- To achieve the media reported (albeit not yet official) growth target of “around 7.0%” for 2015, we believe the government will have to loosen policy further
- We continue to expect one more interest rate cut in Q2 and one 50bp reserve requirement ratio cut in each quarter of 2015
