Will China's GDP Growth Slowdown in Q1 Amid Escalating Trade Dispute With US?

Forex News

China will release first quarter GDP on Tuesday, along with March industrial output, retail sales, property sales and investment, and fixed asset investment data. Analysts suggest that China's gross domestic product growth may have slightly decreased to 6.7% in the first quarter compared to the previous year, and compared to 6.8% for the previous two quarters.

The consensus forecast indicates growth remained comfortably above the government's target of around 6.5% for the full year, which could give policymakers more confidence to step up efforts to reduce risks in the financial system and clean up the environment. Analysts say the main risk to China's economy is now centered on the escalating trade dispute with the United States. Beijing aims keep the economic balancing act intact even as it faces rising trade tensions with its largest trading partner, the United States, that could impact billions of dollars in cross-border trade.

Average PMI readings in Q1-2018 appear to have been weaker than in Q4-2017, suggesting solid but softer growth at the beginning of the year. CPI inflation edged up to 2.1% y/y in Q1 from 1.8% in Q4-2017, mainly due to a return of food inflation. PPI inflation eased to 3.7% y/y in Q1 from 5.9% in Q4-2017 largely due to a high base. Trade performance remained solid in the first quarter.

Export and import growth accelerated to 14.0% y/y and 18.9% y/y in Q1, respectively. Credit growth slowed significantly as the government has identified deleveraging as a top priority. While loan growth remained high at 12.8% y/y in March, total social financing growth fell further to 10.5% y/y from 11.2% in February.