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Growth Differential Expected To Peak In Q2 2023, FX Markets Pricing In Better Outlook

CHINA DATA
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China data was uniformly better than expected, Q4 GDP was flat against a -1.1% forecast, which left y/y growth at 2.9%, also above expectations, but down from the 3.9% pace seen in Q3. IP (+1.3% y/y, versus 0.1% forecast) and retail sales (-1.8% y/y, -9.0% forecast) also comfortably beat expectations. Both measures are also above trough points in recent years (which coincided with previous Covid waves).

  • FAI and property investment were both a touch better than expected, but property sales remained very depressed at -28.3%, little changed from November.
  • The consensus expectation is growth momentum will improve from here, see the chart below, with the dashed lines the consensus y/y projections for 2023. We are expected to be back above 6% by Q2, although part of this reflects base effects versus 2022.
  • This is well above projected pace for other major economies/regions. EU y/y GDP growth is expected to be negative in Q2 (-0.3%) and modestly positive for the US (+0.8%).

Fig 1: China GDP Momentum Projected To Improve Through 2023

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China data was uniformly better than expected, Q4 GDP was flat against a -1.1% forecast, which left y/y growth at 2.9%, also above expectations, but down from the 3.9% pace seen in Q3. IP (+1.3% y/y, versus 0.1% forecast) and retail sales (-1.8% y/y, -9.0% forecast) also comfortably beat expectations. Both measures are also above trough points in recent years (which coincided with previous Covid waves).

  • FAI and property investment were both a touch better than expected, but property sales remained very depressed at -28.3%, little changed from November.
  • The consensus expectation is growth momentum will improve from here, see the chart below, with the dashed lines the consensus y/y projections for 2023. We are expected to be back above 6% by Q2, although part of this reflects base effects versus 2022.
  • This is well above projected pace for other major economies/regions. EU y/y GDP growth is expected to be negative in Q2 (-0.3%) and modestly positive for the US (+0.8%).

Fig 1: China GDP Momentum Projected To Improve Through 2023

Keep reading...Show less