This month, the economic scenario of China has been quite optimistic. Rebound in PMI pulse, improved trade data, stronger commodity and house prices and a stronger GDP growth in Q1 have helped in strengthening confidence. China’s annual real growth in Q1 slowed slightly to 6.7% from 6.8%. However, the country’s nominal growth expanded to 7.2% y/y, the strongest growth seen in five quarters, but this was mainly because of primary sector’s activity. Prices in the sector were quite supportive. Services still continued to be strong with 11.2% y/y growth.
“On the services strength, we remain cautious of the divergence between financial services and wholesale & retail growth – strength is necessary in the latter as the former is set to slow further”, said Westpac.
The Chinese labor market is firming. According to Westpac MNI Consumer Sentiment Survey, consumers are quite hopeful; however, they continue to be concerned regarding job security. China is also worried that there is divergence in growth by industry and also by province, added Westpac. This is seen in China’s housing data, which shows that increase in house prices keep accelerating in Tier 1 cities, while the less-developed cities are falling behind.
Meanwhile, the country posted above expected trade data in March. Exports, in terms of three-month average, have declined 8.4% y/y and grown 12.8% y/y in February. The annual rate is likely to further improve in the following months; however, this does not indicate a come-back to strong trade growth or a slight rebound in China’s manufacturers’ environment.
China’s external backdrop continues to be weak and will continue to be so in the near future, noted Westpac. Hence, economic growth of China will continue to rely on rapidly growing consumer.
The material has been provided by InstaForex Company – www.instaforex.com