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● The headline GDP growth for 4Q10 was stronger than expected at
9.8% YoY, achieved by stronger retail sales and rising inventory.
This resulted in a 10.3% full-year growth for 2010.
● Nominal retail sales in December had improved to 19.1% YoY in
December. Industrial production growth accelerated slightly to
13.5% YoY. Fixed asset investment growth slowed to 21.7% YoY
but rose 24.5% YoY in 4Q.
● CPI inflation was 4.6% YoY in December, softened from 5.1%
YoY in November, but was achieved through base effect. On a
month-on-month basis, CPI rose 0.5%. Food inflation remained a
key driver, at 9.6% YoY, while non-food inflation accelerated
again to 2.1% YoY.
● This set of data is unlikely to change the policy course, and we
still expect mild tightening on the monetary front and continued
expansion on the fiscal front. In our view, growth is not much of a
worry, but inflation must be watched carefully.
The headline GDP growth for 4Q10 was stronger than expected at
9.8% YoY, compared to consensus estimate of 9.4% YoY and 9.6%
YoY in the previous quarter. This was achieved by stronger retail
sales and rising inventory. This resulted in a 10.3% full-year growth for
2010. Based our own calculation, annualised QoQ growth has further
accelerated to 10.7%, compared to 9.6% in 3Q10 and 8.3% for 2Q10.
Overall, this is a set of impressive numbers from the growth
perspective, especially in view of the current global environment and
domestic economic transformation.
Nominal retail sales in December had improved to 19.1% YoY in
December (about 14.3% YoY in real term), versus 18.7% YoY in
November. Industrial production growth for December accelerated
slightly to 13.5% YoY versus 13.3% in November. Fixed asset
investment growth slowed to 21.7% YoY in December after the 28.9%
YoY surge in November, and rose 24.5% YoY in 4Q (23.1% YoY in
3Q). China does not have an official inventory data, but the PMI
survey suggested that output has outpaced new orders, hence we
suspect that part of the improvement is due to inventory rebuilding.
Regardless, we think the slower production growth seen during
autumn is now behind us, although the rebound has been muted.
Strong inflation
CPI inflation for December was 4.6% YoY, a softening from the 5.1%
YoY in November, but it was achieved almost entirely through the
base effect. On a month-on-month basis, CPI rose 0.5%. Food
inflation remained a key driver, at 9.6% YoY. However, we wish also
to point out that non-food inflation has reached 2.1% YoY, the fourth
consecutive monthly rise, as salary increases and higher
material/utility costs start to bite.
Policy implication
This set of data is unlikely to change the policy course, and we still
expect mild tightening on the monetary front and continued expansion
on the fiscal front. The government has been trying hard to boost
private consumption, with measures from encouraging salary increase
to launching retail subsidies. We expect tax cuts in March through the
raising of the entry level of individual tax. While local governmentfunded
infrastructure investment has slowed down sharply, the central
government’s mega projects, as part of the 12th five-year plan, are
kicking in.
For monetary policy, we think the PBoC still favours quantitative
tightening, through raising reserve requirement ratio and controlling
lending activities. The process has been more frequent since
September, but the monetary authority is taking small steps in the
“normalization” process. We think rate hike is inevitable, in view of a
large gap in negative real interest rates.
In our view, growth is not much of a worry, but inflation must be
watched carefully. We expect CPI to reach and possibly break the 6%
YoY level around mid-year. While food inflation remains high, we
anticipate services inflation to emerge after a huge salary increase in
2010, where we reckon a near 40% pay rise for migrant workers on
average.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
● The headline GDP growth for 4Q10 was stronger than expected at
9.8% YoY, achieved by stronger retail sales and rising inventory.
This resulted in a 10.3% full-year growth for 2010.
● Nominal retail sales in December had improved to 19.1% YoY in
December. Industrial production growth accelerated slightly to
13.5% YoY. Fixed asset investment growth slowed to 21.7% YoY
but rose 24.5% YoY in 4Q.
● CPI inflation was 4.6% YoY in December, softened from 5.1%
YoY in November, but was achieved through base effect. On a
month-on-month basis, CPI rose 0.5%. Food inflation remained a
key driver, at 9.6% YoY, while non-food inflation accelerated
again to 2.1% YoY.
● This set of data is unlikely to change the policy course, and we
still expect mild tightening on the monetary front and continued
expansion on the fiscal front. In our view, growth is not much of a
worry, but inflation must be watched carefully.
The headline GDP growth for 4Q10 was stronger than expected at
9.8% YoY, compared to consensus estimate of 9.4% YoY and 9.6%
YoY in the previous quarter. This was achieved by stronger retail
sales and rising inventory. This resulted in a 10.3% full-year growth for
2010. Based our own calculation, annualised QoQ growth has further
accelerated to 10.7%, compared to 9.6% in 3Q10 and 8.3% for 2Q10.
Overall, this is a set of impressive numbers from the growth
perspective, especially in view of the current global environment and
domestic economic transformation.
Nominal retail sales in December had improved to 19.1% YoY in
December (about 14.3% YoY in real term), versus 18.7% YoY in
November. Industrial production growth for December accelerated
slightly to 13.5% YoY versus 13.3% in November. Fixed asset
investment growth slowed to 21.7% YoY in December after the 28.9%
YoY surge in November, and rose 24.5% YoY in 4Q (23.1% YoY in
3Q). China does not have an official inventory data, but the PMI
survey suggested that output has outpaced new orders, hence we
suspect that part of the improvement is due to inventory rebuilding.
Regardless, we think the slower production growth seen during
autumn is now behind us, although the rebound has been muted.
Strong inflation
CPI inflation for December was 4.6% YoY, a softening from the 5.1%
YoY in November, but it was achieved almost entirely through the
base effect. On a month-on-month basis, CPI rose 0.5%. Food
inflation remained a key driver, at 9.6% YoY. However, we wish also
to point out that non-food inflation has reached 2.1% YoY, the fourth
consecutive monthly rise, as salary increases and higher
material/utility costs start to bite.
Policy implication
This set of data is unlikely to change the policy course, and we still
expect mild tightening on the monetary front and continued expansion
on the fiscal front. The government has been trying hard to boost
private consumption, with measures from encouraging salary increase
to launching retail subsidies. We expect tax cuts in March through the
raising of the entry level of individual tax. While local governmentfunded
infrastructure investment has slowed down sharply, the central
government’s mega projects, as part of the 12th five-year plan, are
kicking in.
For monetary policy, we think the PBoC still favours quantitative
tightening, through raising reserve requirement ratio and controlling
lending activities. The process has been more frequent since
September, but the monetary authority is taking small steps in the
“normalization” process. We think rate hike is inevitable, in view of a
large gap in negative real interest rates.
In our view, growth is not much of a worry, but inflation must be
watched carefully. We expect CPI to reach and possibly break the 6%
YoY level around mid-year. While food inflation remains high, we
anticipate services inflation to emerge after a huge salary increase in
2010, where we reckon a near 40% pay rise for migrant workers on
average.
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