UOB Group economist Ho Woei Chen, CFA, reviews the latest series of results on the Chinese economic calendar.
Key points
“They were observed improvements in all China data including industrial production, retail sales, fixed asset investment and unemployment rate surveyed in August. The numbers also slightly outperformed the Bloomberg consensus forecast, which we believe was set fairly modestly given the worsening economic outlook, including the COVID situation and power shortages in August.”
Due to difficult internal and external prospects, we maintain our China GDP growth forecast for 2022 at 3.3%with a third quarter of 2022 of 3.4% per year and a quarter of 4.5% per year, which represents a recovery from 2.5% per year in the first half.”
“The People’s Bank of China (PBoC) kept the 1-year Medium-Term Lending Facility (MLF) rate at 2.75% in September and rolled over CNY400 billion of the CNY600 billion due this month. This came after the central bank cut the one-year MLF rate for the second time this year in August, by 10 basis points.”
“As consumer and producer price inflation eased in August and the economic outlook remains weak, we continue to see room for a further 10 basis point cut in the 1y MLF in Q4 2022. This will entail a corresponding fall in the lending prime rates (LPR). We expect the one-year prime rate to decline to 3.55% by the end of 2022 (from 3.65% today). After a 35 basis point cut so far this year, the five-year prime rate is still poised to fall further (from 4.30% today) as the PBoC extends its support to the housing market.”
Source: Fx Street
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