Mainland Jan-Feb data to reveal slower growth
Updated: 2011-03-08 07:04
(HK Edition)
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Major economic indicators expected to be released this week will likely show a broad-based slowdown in year-on-year (YoY) growth due to moderating growth momentum and a high base of comparison to the same period in 2010.
The National Bureau of Statistics will release the first set of major economic activity indicators of 2011 this Thursday and Friday. The January-February data for industrial production, fixed asset investment and retail sales will be averaged out to remove distortions from the week-long Chinese New Year holiday's.
The February CPI inflation figures are expected to edge down to 4.8 percent YoY on slowing food price inflation, but the PPI inflation could have inched up to 6.9 percent on higher energy and commodity prices.
Overall, some slowdown in growth momentum from the fourth quarter of 2010 should be expected, reflecting the aggressive policy tightening measures taken to control inflation and asset bubble risks that have been implemented in the past few months.
Additionally, it is also a natural moderation from the accelerating pace of expansion during October-November 2010.
With monetary policy tightening expected to remain in place through the first half of 2011 - I look for two more rate hikes and required reserve ratio (RRR) hikes - the extent and pace of the growth slowdown warrants close monitoring.
The industrial production growth is forecast to slow to 13.1 percent YoY in January-February from 13.5 percent in December as suggested by the PMI figures.
The growth in fixed-asset investment so far this year is also expected to ease to 23.9 percent YoY from 24.5 percent in December. Businesses have been reporting tighter credit conditions, higher borrowing costs and surging input costs. More stringent property tightening measures have likely weighed on property investment.
Consumer sentiment has deteriorated sharply in recent months on higher inflation and elevated property prices. As a result, retail sales growth could have slowed to 18.5 percent YoY from 19.1 percent previously.
But I do not expect a sharp slowdown in consumer spending.
On the external front, I expect some payback in export growth in February, given the rush for deliveries ahead of the Chinese New Year. Export growth could have slowed to 27 percent YoY from 37.7 percent in January. I also look for slower import growth of 36 percent YoY versus 51 percent previously, with the YoY growth being boosted by higher commodity prices.
On the inflation front, I expect the February CPI inflation to edge lower to 4.8 percent YoY from January's 4.9 percent as food prices (e.g., vegetable and egg prices) fell after the Chinese New Year.
The National Development and Reform Commission said last week that the government will continue to promote agriculture production to ensure the supply of major agricultural products, particularly grains, improve distribution facilities (e.g., reduce transportation costs further) and strengthen market and price regulations.
Bucking the trend, the PPI is likely to rise further to 6.9 percent YoY from 6.6 percent on higher energy and commodity price rises.
Meanwhile, M2 measurement of money supply growth is expected to moderate to 17 percent YoY from 17.2 percent in January.
Media reports suggest that February new loans could come in as low as 600 billion yuan due to the People's Bank of China's tight credit controls/differentiated RRR hikes, compared with 700 billion yuan a year earlier and 1.04 trillion yuan in January.
The author is vice president and China economist at Barclays Capital Asia Ltd. The opinions expressed here are entirely her own.
(HK Edition 03/08/2011 page2)