Tomorrow's market mover--China will report fourth quarter GDP growth
01/16/2012 5:27 pm EST
Economists are looking for growth to drop below 9%. How far below 9%? The emerging consensus of the last few days seems to be somewhere around 8.5%. That would be the lowest reading since the fourth quarter of 2009 when the global economy was struggling with fallout from the global financial crisis. A reading of 8.5% would put China on the road to a bottom of 7.5% to 7.7% in the first or second quarter of 2012.
Investors will also get figures on industrial output, investment in fixed assets, and retail sales for December. Ideally, what investors would like to see is drop in fixed asset investment—showing that the government’s efforts to damp real estate investment continue to work—and a rise in consumer spending—showing that China’s consumers are picking up the economic slack. This would indicate that the long-awaited rebalancing of China’s economy is finally taking shape. That would be ideal but I’m not holding my breath. Consumption as a percentage of GDP has been falling since 2000 and reversing that relative decline is the work of more than a quarter or two.
Besides the headline quarterly numbers, watch the monthly data to see if any trends, particularly the slowdown in economic growth, picked up speed as the quarter drew to a close.
In the longer-term (four to six months) slower growth is a good thing since it will lead to a reversal of monetary policy at the People’s Bank and interest rate cuts in mid-2012. In the shorter term, though, I think reports of slower growth will probably depress stock prices as fears of a hard landing outweigh hopes for interest rate reductions.
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