China: Growth ends Q1 on a strong note - Nomura

The research team at Nomura notes that the Chinese growth momentum remained resilient in Q1 as the real GDP growth accelerated to 6.9% y-o-y in Q1 from 6.8% in Q4 (Consensus and Nomura: 6.8%).

Key Quotes

“On a seasonally adjusted quarter-on-quarter basis, real GDP growth slowed to 1.3% in Q1 from 1.7% in Q4.”

“We believe the resilient growth in Q1 was supported more by production and investment than other factors, as growth of industrial production and fixed asset investment both accelerated in year-on-year terms in Q1. The contribution from “other” services sectors may also helped, as in past quarters; the detailed breakdown of GDP components, to be released later, could provide further insights.”

“March activity data further improved across the board.

• Industrial production growth jumped to a higher-than-expected 7.6% y-o-y from 6.3% in January-February, its highest in 27 months (Consensus: 6.3%; Nomura: 6.4%), with three major industries (mining, manufacturing and utility) all improving.
• Fixed asset investment growth rose to 9.2% y-o-y ytd from 8.9% in February (Consensus: 8.8%; Nomura: 8.9%). This was largely underpinned by property (growth up by 0.2pp to 9.1%) and manufacturing investment (up by 1.5pp to 5.8%, a good sign of positive spill-over from the hot property sector to related manufacturing investment), while infrastructure investment growth slowed.
• Retail sales growth also beat expectations, rising to 10.9% y-o-y in March from 9.5% (Consensus: 9.7%; Nomura: 9.6%). The drag from auto sales seems to be fading, as its growth picked up to 8.6% y-o-y from -1.0% in January-February. That said, consumption growth in Q1 slowed to 10.0% y-o-y from 10.6% in Q4.”

“As these stronger-than-expected activity data released today point to resilient growth momentum, we are raising our 2017 GDP growth forecast by 0.2 percentage points (pp) to 6.7% and adjusting our quarterly forecasts to 6.8% y-o-y, 6.6% and 6.6% for Q2, Q3 and Q4, respectively. However, given rounds of policy tightening on the property sector, we do not think the strength in property investment is sustainable and continue to expect the sector to cool in coming quarters. We maintain our view of a downward quarterly growth path in 2017.”