VIEW: J.P.Morgan Mark Down ’22 GDP Growth Expectations

Monday saw J.P.Morgan revise down their full-year China GDP growth forecast “from 4.3% to 3.7%. The new forecast assumes a deeper contraction in the current quarter to -5.4% Q/Q saar (previously: -1.5%), followed by a stronger recovery in Q3 at +7.5% Q/Q saar (previously: +4.9%).”

• “Uncertainties related to economic forecasts are high as: (i) implementation of zero-COVID policy remains the biggest uncertainty, including the risk of prolonged disruption of economic activity and the risk of recurring Omicron waves; and (ii) the government may introduce additional policy stimulus within the next few months, e.g., supplementary fiscal, fiscal transfer to households or more aggressive housing policy relaxation.”
• “Investors’ assessment of the economic outlook is biased to the bearish side, for two important reasons: (i) the “data-smoothing” practice and concerns about quality of the NBS statistics; and (ii) a larger component of “unproductive GDP” related to the cost of zero-COVID policy implementation, which tends to increase the economic/operational costs of business activities.”