VIEW: Nomura: Expect More Downward Pressure On Growth In H2

Nomura note that they "expect increasing downward pressure on growth in H221, especially in Q4, as pent-up demand subsides, exports weaken as reopening developed markets shift back to services consumption, property tightening measures finally bite, and surging raw material prices suppress real demand."

• "We expect seasonally adjusted quarter-on-quarter real GDP growth to rebound to 2.0% in Q2 from 0.6% in Q1, but then slow to 1.3% in Q3 and 1.4% in Q4. Year-on-year real GDP growth would accordingly drop to 8.1% in Q2, 6.4% in Q3 and 5.3% in Q4. We maintain our annual growth forecast of 8.9% for this year, but see more risks on the downside."
• "On the recent surge of raw material prices, the market has increasingly debated whether it's imported or domestic, whether it's due to too much demand or limited supply. But no matter what the driver is, the rapid rise in raw material prices is set to dent demand soon for two major reasons: 1) with the same amount of money (assuming a fixed credit growth target this year), higher prices mean less real demand; and 2) surging raw material prices mean higher costs and squeezed margins for firms in downstream sectors, constraining their production and causing some supply chain disruptions. We expect Beijing to be increasingly concerned about runaway commodity prices, to take action to secure supplies and adjust some overly ambitious carbon emission reduction measures, to keep its "no sharp shift" policy commitment and to aim to maintain a stable RMB against its basket."
• "In the very near term, we expect a decent recovery in Q2 driven by pent-up consumption demand, strong exports, faster FAI growth, and rising restocking demand in fear of surging raw material prices."