China Seen Posting Strong February Export Growth, Factory Inflation to Moderate

A raft of Chinese economic data in the next few weeks is expected to show growth was mostly stable at the start of the year as exports picked up and factory activity remained largely resilient despite tougher air pollution measures.

Business surveys last week gave a mixed picture about the health of the world’s second-largest economy in February.

But analysts cautioned that the timing of long Lunar New Year holidays, which fell in mid-February this year, will distort trends as usual and said investors may not get a clearer picture of China’s economic health until first-quarter data is released in April.

Premier Li Keqiang kicked off annual parliament meetings on Monday by saying China aims to expand its economy by around 6.5 percent this year. That is the same target as in 2017, when actual growth came in at 6.9 percent.

Li also stressed the government needs to take further steps to reduce risks in the financial system, which analysts believe will eventually rob the economy of some growth momentum by making banks more cautious about lending and pushing up borrowing costs.

February foreign exchange reserves will be published Wednesday, followed by trade data on Thursday and inflation on Friday. Bank lending and money supply data will be released anytime March 10-15.

In an attempt to iron out Lunar New Year distortions, China will announce combined January and February data for industrial output, fixed asset investment and retail sales on March 14.

One big change this year could be a reversal of strong growth in China’s factory inflation, which helped boost industrial profits last year, according to a Reuters poll of 42 economists. Stronger earnings also helped boost cash flow, giving companies more room to pay down debt, a key policy goal for Beijing.

Following on January’s solid export data, growth likely picked up further to an 11-month high in February. However, import growth likely slowed dramatically from January due more to seasonal factors than an abrupt softening in demand.

Resurgent exports last year helped boost China’s overall growth, though trade tensions are escalating rapidly this year as U.S. President Donald Trump prepares to roll out new tariffs on steel and aluminium imports and threatens other punitive measures.