Goldman Sachs and Morgan Stanley have upgraded their growth forecasts for China this year.
According to Bloomberg on the 11th, Goldman Sachs predicted in a recent report that the Chinese economy would have grown at an annual rate of 7.5% in the first quarter compared to the previous quarter. The earlier estimate was 5.6%. Goldman Sachs also raised its forecast for this year from 4.8% to 5%. If this holds, the Chinese government will be able to achieve its goal of ‘around 5% growth’ this year.
The upgraded forecast comes after the Purchasing Managers’ Index (PMI) for China’s manufacturing sector showed expansion for the fifth consecutive month in March. Goldman Sachs stated, “Recent macro data from China has been robust,” and “Manufacturing data suggests that the Chinese economy has bottomed out at the end of last year and is rebounding.”
In a recent report, Morgan Stanley also raised its growth forecast for China this year from 4.2% to 4.8%. It cited the recovery of U.S. demand and better-than-expected export performance for the upgrade. Morgan Stanley predicted, “The Chinese government’s policy focusing on upgrading the supply chain seems to be driving strong capital spending in the manufacturing sector.”
The Chinese economy seeks a rebound amid continued real estate and consumption vulnerabilities. Exports in the first two months of this year increased by 7.1% compared to last year’s period, and both industrial production and retail sales exceeded expectations earlier this year, fueling optimism. However, the Consumer Price Index (CPI) in March only rose by 0.1% compared to last year, maintaining concerns over deflation. China’s GDP growth rate for the first quarter of this year will be announced next week. Bloomberg predicts 5% growth compared to the same period last year. The growth rate for the previous quarter (4Q 2023) was 5.2%.
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