China calibration continues
Fine-tuning and calibration continue in China, with more data this
week to confirm why last week the authorities brought forward the
first RRR cut of this cycle. Last week's drop in manu PMIs was followed
by a steep fall in the non-manu survey to 49.7 from 57.7. This Fri, China's
Nov activity data are expected to show softer growth into year end, with
fixed asset investment to grow 24.6%oya, ytd, which would imply only
growth of only 21.6%oya for Nov alone. For IP, our forecast of 11.8%oya
is well below the consensus forecast of 12.6%. On the bright side, we
expect retail sales to grow over 1%m/m, sa, producing a 17%oya headline
figure. Note that China's trade data are scheduled to be released on Sat,
with export growth expected to drop sharply to 11.1% from over 20% only
three months ago, though the trade surplus should rise back above $20bn.
As far as translating all of this into GDP, our 4Q11 forecast is for a
7.4%q/q, saar pace of growth, and a similarly muted 7.2% pace in 1Q12.
On inflation, we expect big drops in both headline CPI as well as PPI,
with base effect becoming sizable. For China's Nov CPI, our forecast is in
line with consensus in expecting 4.5%oya, while for PPI, we expect a gap
lower to 3.3%oya from 5.0% in Oct.
Soft data elsewhere in EM Asia, plus lower CPI