Following higher-than-expected growth in March, China’s macro economic recovery is expected to continue, analysts said, although the momentum may ease compared with that of March.
The country’s Purchasing Managers’ Index, released by the National Bureau of Statistics earlier this month, slightly dropped to 50.1 in April from 50.2 in March. But this is still expansionary territory, which indicates that manufacturing production growth remains on track.
The authorities’ policy of stabilizing growth is also set to continue to take effect after the first quarter, UBS economists said in a research note.
After home sales soared in the first three months of the year, the real estate sector remained brisk in April given the rising construction subindex of the PMI, according to a report by an Industrial Bank research team led by Lu Zhengwei. The construction subindex reached 59.4 in April, up by 1.4 from the previous month, indicating that “the situation continues to improve and infrastructure and real estate investment remains strong”.
Industrial activities are expected to grow steadily year-on-year due to investment and real estate sector recovery, as well as the acceleration of infrastructure construction. But production momentum may ease considering the policy effect of reducing overcapacity in some industries and regions, according to a report by Huatai Securities.
The significant rebound of fixed-asset investment growth in the first quarter was mainly driven by the rapid recovery of the real estate sector and government infrastructure construction investment. Growth in real estate sales and housing are expected to remain high, despite tightening real estate policies in some first- and second-tier cities with overheated housing prices. Infrastructure construction investment’s high growth rate will be supported by credit expansion, special construction funds financed by debts issued by State policy banks, approved infrastructure construction projects and the acceleration of local government bond replacement in the next stage. Thus fixed-asset investment growth is expected to further increase in April, said the UBS research note.
On the price front, consumer prices may continue to rise moderately while the factory-gate prices may see its decline slow, analysts said.
According to a Ping An Securities report, food prices dropped slightly in April due to the large-scale decline in vegetable prices. But the pork price continued to increase significantly and may continue to rise in the short term. In the non-food sector, housing rents may increase because of rising real estate prices, and transportation costs may also increase due to the rebound in international oil prices. All these factors will have upward pressures on the consumer price index, according to the Ping An report.