More Sell-Side Views Post China GDP

Nomura and SocGen also remain upbeat on full-year projections, albeit with some moderation as we progress through the year. The banks do have somewhat divergent views on the monetary policy outlook though.

Nomura: "Due to a sharp drop in the comparison bases as a result of the Shanghai lockdown last year amid ongoing strength in the in-person services sector, we expect year-on-year GDP growth to clearly rebound further in Q2. The Golden Week holiday in the first week of May will be the first multi-day holiday since the January exit wave. As international travel is still quite restricted due to barriers such as flight shortages and remaining PCR testing requirements, most travel demand will take place onshore. We maintain our GDP growth forecasts of 7.6% y-o-y for Q2 and 5.3% for 2023, but we see risks as skewed to the upside. Also, China appears decisively on track to achieve the government’s conservative GDP growth target of “around 5%” for this year. Sequential growth, however, is set to slow, with pent-up demand for home purchases subsiding, escalating geopolitical tensions, export growth unsustainable and worsening fiscal conditions in low-tier cities. Despite the better-than-expected GDP growth reading in Q1, we still assign a higher likelihood than before to the PBoC slightly lowering its benchmark MLF rate in the next couple of months."

SocGen: "The recovery is uneven and unusual, with services and consumption outperforming industrial and investments. Some may even find the strength of consumption puzzling, but we don’t. Only a small portion of services consumption is captured by monthly data, and these “invisible” consumption sub-sectors that were the most depressed are now recovering the fastest. The service-led nature of the recovery is also why China’s spill-over effects on global demand and inflation have been less visible this time.

Following today’s data, even our above-consensus GDP forecast (5.8%) no longer seems optimistic enough. Looking ahead, we see a bit of weaker sequential growth from here than we had initially forecast, but we still get 6% growth for this year. And of course, we maintain our call that the PBoC has finished with easing (RRR or interest rate cuts). The policy easing needed the most to sustain the recovery, as policymakers have realised and started to implement (and should continue to do so), is to restore a pro-growth and pragmatic stance."