CHINA GDP EXCEEDS EXPECTATIONS, RISING 7.9%

UPDATE: China's Q4 2012 GDP release is out.

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GDP rose 7.9 percent year-over-year in the fourth quarter versus expectations of a 7.8 percent rise.

Industrial production rose 10.3 percent year-over-year versus expectations of a 10.2 percent rise.

Retail sales rose 15.2 percent versus expectations of a 15.1 percent rise.

Fixed asset investment growth fell 0.1 percentage points to 20.6 percent.

Markets aren't moving much on the news.

Bloomberg BRIEF economist Michael McDonough tweeted an updated chart incorporating tonight's data release:

In a note to clients following the release, BofA economist Ting Lu said today's data won't provide Chinese authorities with any reason to up the stimulus:

Today’s data will not change ongoing policy stance. Maintaining stable growth is the new leadership’s key policy mandate in 2013. For 2013, it’s very likely for the government to set 7.5% GDP growth target, 3.5% CPI inflation target and 13.0% M2 growth target (compared with the respective targets of 7.5%, 4.0% and 14.0% in 2012).

Pro-growth policies in 2012 will be extended into 2013, and big-bang stimulus will be avoided unless there is another global financial crisis. Within 2013, policy will likely be marginally tightened towards 2H13 on concerns of rising inflation, rising home prices, investment overheating and financial system risks. We expect no rate changes (cuts or hikes) in 2013, and we expect the PBoC to deliver a stable interbank rate this year (so the number of RRR cuts or hikes is not important).

The BofA economist sees more upside to growth from here, but expects growth to peak out this year, writing, " We expect  yoy  GDP  growth to peak around 8.3% in 1H13 and slow to 8.0% in 2H13. The 10.3% IP growth in Dec suggests that monthly upward momentum might be stronger than market had expected. Our suggestion to investors  is  to remain bullish in 1H13, but to exercise more caution in 2H13."

DBS Vickers economist Chris Leung thinks infrastructure investment is still a bullish theme:

Meanwhile, FAI has begun to speed up noticeably since September as project approvals quickened. Full-year FAI growth for 2012 was 20.6%. We anticipate a notable rebound beginning 1Q13 as new leaderships usually exhibit pro-growth policy bias.

In addition, China’s strategy to accelerate urbanization calls for more infrastructure investment. Indeed, there are signs that FAI is already picking up in the non-transport infrastructure space (water conservancy, electricity, gas and water production). On the other hand, growth of real estate FAI is expected to remain steady in 2013 (2012E: 22.0%) as Beijing maintains a firm grip on the property sector.

Leung concludes that the "slowdown has run its course."

Below is a complete summary of all of China's big Q4 economic data releases, courtesy of BofA:

Statistics on electricity consumption, which are generally considered to be more trustworthy than the official economic growth statistics, confirmed that the economy rebounded in the fourth quarter.

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ORIGINAL: Minutes away from a key release – China's Q4 2012 GDP figures – out at 9 PM ET.

Economists expect real GDP to have risen 7.8 percent year-over-year in the fourth quarter, with GDP growth year-to-date estimated at 7.7 percent. On a quarterly basis, economists estimate GDP rose 2.2 percent in Q4.

There are a few additional releases at 9 PM in addition to GDP:

  • Industrial production is expected to have risen 10.2 percent year-over-year, or 10 percent year-to-date
  • Fixed asset investment year-to-date is expected to rise 20.7 percent year-over-year
  • Retail sales are expected to have risen 15.1 percent year-over-year, or 14.3 percent year-to-date
Of course, there are concerns over the reliability of the official statistics published by the Chinese government. Societe Generale economist Wei Yao writes in a note to clients:

The reliability of China’s data has been a recurring topic. In recent months, while the recovery trend of Chinese exports has been largely consistent with its trading partners’ data, the magnitude of the acceleration has looked stretched.

Taking all the data surprises so far at face value suggests a stronger Q4 2012 and hints at an even stronger Q1 2013 than our initial expectation. We still think the recovery will fade by mid-2013, but the carry-over effect alone warrants an upward revision to our 2013 forecast of official GDP growth from 7.4% to 7.8%.

Click here for an expanded preview of the release with more color from BofA Merrill Lynch >

We will have all of the data LIVE at 9 PM ET. Click here for updates >



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