20 Jan 2015
China's electricity consumption improves in Dec - Nomura
FXStreet (Bali) - China's electricity consumption improved in December, supporting Nomura's view that industrial production growth will too.
Key Quotes
"Electricity consumption growth rose to 4.2% y-o-y in December 2014 from 3.3% in November. This is consistent with the 0.2 percentage point gain in loan growth to 13.6% y-o-y in December."
"Electricity consumption and railway freight traffic data, together with bank loans, are indicators watched by Premier Li to gauge the economic pulse. Indeed, they are highly correlated (0.66 for electricity consumption and 0.67 for railway freight traffic) with industrial production (IP) growth, over the period since January 2005. Their turning points also match those in IP growth well. For instance, both bottomed after the change in policy stance from tightening to easing in Q2 2013 – as did IP growth."
"This reinforces our forecast that December IP growth (due 20 January) will surprise the consensus (7.4% y-o-y) on the upside, rising to 7.8% from 7.2% in November, as the distortion from factory shutdowns during the November APEC meeting has faded, while more policy stimulus is enacted."
"We maintain our GDP growth forecast of 7.3% y-o-y in Q4 2014, before slowing to 7.1% in Q1 2015, weighed down by tighter controls over local government financing, the property market correction and other structural issues."
Key Quotes
"Electricity consumption growth rose to 4.2% y-o-y in December 2014 from 3.3% in November. This is consistent with the 0.2 percentage point gain in loan growth to 13.6% y-o-y in December."
"Electricity consumption and railway freight traffic data, together with bank loans, are indicators watched by Premier Li to gauge the economic pulse. Indeed, they are highly correlated (0.66 for electricity consumption and 0.67 for railway freight traffic) with industrial production (IP) growth, over the period since January 2005. Their turning points also match those in IP growth well. For instance, both bottomed after the change in policy stance from tightening to easing in Q2 2013 – as did IP growth."
"This reinforces our forecast that December IP growth (due 20 January) will surprise the consensus (7.4% y-o-y) on the upside, rising to 7.8% from 7.2% in November, as the distortion from factory shutdowns during the November APEC meeting has faded, while more policy stimulus is enacted."
"We maintain our GDP growth forecast of 7.3% y-o-y in Q4 2014, before slowing to 7.1% in Q1 2015, weighed down by tighter controls over local government financing, the property market correction and other structural issues."