China’s economy probably cooled further to grow 7 percent in the first three months of the year, a Reuters poll showed, which would be the weakest pace in six years and raises pressure on policymakers to do more to bolster growth.
The deluge of data over the coming week, starting with inflation on Friday and culminating with gross domestic product data on April 15, will almost certainly revive speculation about when and how China will next ease monetary policy.
China has lowered interest rates and relaxed banks’ reserve requirements in the last three months as activity has slowly deteriorated. Investors widely expect it to loosen policy on both fronts again in coming months, if not coming weeks, to shore up flagging growth.
“They probably have to do a little bit more, a little bit sooner,” said Kevin Lai, an economist at Daiwa Securities in Hong Kong, who predicts first-quarter growth of 7.1 percent.
He said Chinese policymakers would likely be alarmed if the economy slowed to around 6.8 percent annual growth in the first three months, a level that’s half a percentage point lower than fourth-quarter growth.
The pace of such a cooldown would be “too drastic, too rapid”, Lai said, and would argue for policymakers to act more quickly to smooth fluctuations in growth.
Friday’s inflation data could offer clues on how worried policymakers should be.
Hurt by a property downturn and lackluster foreign and domestic demand, China has fought intensifying deflationary pressure in recent months, a trend that senior leaders say is a key threat to growth. A sharp falloff in consumer prices in March would be bound to unsettle the government.
The median forecast of 29 analysts showed China’s consumer inflation is expected to cool a shade to 1.3 percent in March on a yearly basis, from February’s 1.4 percent. That is within sight of the 1 percent level that officials have said is a warning “red-line” for deflation.
And producer deflation, which has persisted in China since early 2012, is not expected to have eased last month. Producer prices are forecast to be down 4.8 percent in March on an annual basis, the same as in February.
Report by Reuters.