28 January 2013
Asia Chart Alert: China: Industrial profit improves; destocking continues
Data further support our view that GDP growth is likely to rebound to 8.2% y-o-y in Q1 2013.
Fig. 1: Industrial profit and inventory
· The National Bureau of Statistics released industrial sector profit data on Sunday. Industrial profit growth continued to improve, reaching 5.3% y-o-y (ytd) in December, from 3.0% in November. Alongside this, industrial inventory growth continues its downtrend, reaching 7.2% y-o-y in December from 7.9% in November.
· These data suggest that growth momentum will likely remain strong in Q1 as the economic cycle moves into a restocking phase. We remain comfortable with our forecast of GDP growth rebounding to 8.2% y-o-y in Q1 2013 from 7.9% in Q4 2012.
· However, contrary to consensus, we believe the recovery is unsustainable and we expect GDP growth to slow to 7.3% in H2 from 8.1% in H1, with the policy bias shifting to tightening as concerns over inflation and financing risks rise.
Source: CEIC and Nomura Global Economics.
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