China: A likely good start to Q4

The official manufacturing PMI edged up to 50.1 in October, the first above-50 reading since April. Retail sales growth likely edged up on policy measures, holidays and online shopping festival boost. CPI inflation may have remained soft; PPI deflation likely moderated as metal prices rebounded m/m. We expect M2 and CNY loan growth to have picked up on liquidity injection, lower lending costs, Standard Chartered’s economists Hunter Chan and Shuang Ding note.

Domestic demand improves

“Retail sales growth likely picked up to 3.5% y/y, with support from the consumer goods trade-in campaign, a m/m increase in home sales, and the holiday boost. Meanwhile, fixed asset investment (FAI) growth may have eased, with the decline in real-estate investment likely intensifying amid falling land transactions.”

“Base effects likely lifted export growth but weighed on import growth. Meanwhile, the PMI survey suggests weaker new export orders and improved imports. We, therefore, expect the monthly trade surplus to have widened. CPI inflation may have stayed at 0.4% y/y, with food prices declining m/m. PPI deflation likely eased as metal and cement prices rebounded.”

“We expect M2 growth to have edged up to 7% y/y as the People’s Bank of China (PBoC) net-injected liquidity through the new outright reverse repurchase operations and net treasury bond purchases. CNY loan outstanding growth likely picked up to 8.2% y/y as loan demand may have increased on lower borrowing costs.”

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