PREVIEW-Chinese economy to keep rolling on; inflation rising

* WHAT: China February economic indicators from the
National Bureau of Statistics

* WHEN: March 11, 0200 GMT

* REUTERS FORECASTS: (all expressed as pct chg y/y)

NO.
OF

MEDIAN RANGE Jan/10 Feb/09
FORECASTS

CPI 2.3 1.9/3.5 1.5 -1.6
28

PPI 5.2 4.0/5.8 4.3 -4.5
25

Ind. Output 19.3 13.0/24.0 18.5 3.8
25

Retail Sales 18.0 15.4/23.0 17.5 15.2
26

Urban FAI 26.0 16.0/33.0 30.5 26.5 27

(CPI and PPI are for Feb; others are for Jan/Feb combined)

* FACTORS TO WATCH:

China’s economic indicators are always difficult to read
early in the year because of the distortions introduced by the
variable timing of the Lunar New Year holidays, when many
factories shut for a week or two.

Interpreting year-on-year changes is even tougher this year
because of the low base of comparison in 2009, when the economy
was suffering badly from the global credit crunch.

The uncertainty is reflected in a very wide range of
forecasts.

On balance, though, economists expect a marked deceleration
in urban fixed-asset investment growth. A year ago the
government was frantically rolling out new projects; the pace
has now slackened, with Premier Wen Jiabao emphasising the need
to rein in new starts and to concentrate on completing work
under way.

Retail sales should remain buoyant, benefitting from rising
incomes and government subsidies. Inflation is accelerating,
but not at an alarming pace — at least for consumers.

* MARKET IMPACT:

The biggest risk is that consumer inflation surprises on
the upside.

The central bank will be nervous if CPI inflation exceeds
the 2.25 percent rate on one-year certificates of deposit as
savers, seeing the value of their money shrink in real terms,
would have an incentive to take their money out of the bank and
invest in property.

The central bank has already raised reserve requirements
twice this year, and its senior officials have been stressing
the range of monetary tools at their disposal, including
interest rates, to keep inflation within Beijing’s 3 percent
target.

Breakdown of forecasts (pct change y/y):

CPI PPI Ind output Retail
FAI
Action Economics 3.0 5.5 21.0 19.0
20.0
ANZ 2.5 5.0 19.8 18.1
25.8
BOA Merrill Lynch 2.6 5.0 20.0 17.5
25.0
Bank of China 1.9 5.5 19.1 17.9
31.2
Bank of Communications 2.0 5.1 17.8 18.0
25.8
Barclays Capital 2.1 5.3 19.5 18.3
24.0
CEBM 2.0 5.8 17.9 15.4
26.2
China Merchants Secs 2.3 5.0 20.0 17.5
30.0
CICC 2.3 5.2 20.0 17.8
25.0
Citi 2.4 5.0 19.5 18.6
25.3
Daiwa Cap Markets 2.8 5.3 13.0 18.6
25.0
Deutsche Bank 2.2 5.7 15.0 17.2
24.0
Essence Securities 2.0 4.5 19.8 17.9
28.0
Fortune Trust 2.0 5.1 18.5 18.0
25.0
Galaxy Securities 1.9 5.0 18.0 17.0
26.0
Guohai Securities 2.3 5.6 ~ 18.0
27.0
Guosen Securities 2.3 ~ 22.0 19.0
16.0
Guotai Junan Securities 2.1 4.0 16.0 18.0
23.0
Industrial Bank 2.6 4.7 21.5 20.0
28.6
Industrial Securities 2.8 5.1 20.0 23.0
26.0
ING 2.6 5.5 15.0 19.0
27.0
Qilu Securities 2.6 5.3 17.5 18.3
29.0
SJS Markets 2.9 5.5 24.0 21.9
18.3
Shenyin & Wanguo Secs 2.4 ~ ~ ~
29.0
Societe Generale 3.5 5.5 20.0 18.0
33.0
Standard Chartered 2.3 5.2 16.5 15.5
29.5
State Information Centre 3.0 4.0 ~ ~
~
UBS 2.1 5.5 20.0 17.0
28.5
—————————————————————

MEDIAN 2.3 5.2 19.3 18.0
26.0
PREVIOUS MONTH 1.5 4.3 18.5 17.5
30.5
PREVIOUS YEAR -1.6 -4.5 3.8 15.2 26.5

LINKS:

* January’s inflation data: [ID:nBJB003680]

* December’s IP, FAI and retail sales data: [ID:nTOE60K02C]

* China indicator fixed page: (ECONCN: )

* All China economic data (CN/DATA: )

Investment Tools

(Writing by Alan Wheatley)

PREVIEW-Chinese economy to keep rolling on; inflation rising