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Economic data expected to rebound, but not real business

By Wang Yanlin | August 6, 2013, Tuesday | Online Edition

Rebounds may be the key word of July's key economic data, which are to be released starting Thursday. But it means rebounds in data more than rebounds in real business activity, analysts said.

Lu Zhengwei, chief economist at Industrial Bank, said the possibly stronger data are largely a result of the lower comparative base.

"We expect nearly all figures will rise in July, and data in the next few months may fluctuate a lot due to the base changes," Lu said.

He forecast the Consumer Price Index, the main gauge of inflation, may expand 2.8 percent year on year last month, up from June's four-month high of 2.7 percent increase.

The Producer Price Index, the factory-gate measurement of inflation, may fall 2.2 percent in July, narrowing from the drop of 2.7 percent a month earlier.

The most noticeable rebound may go to trade figures. Lu projected exports advanced 12 percent in July, reversing the decrease of 3.1 percent in June. Imports, in Lu's opinion, also rebounded to an 11-percent gain from the loss of 0.7 percent a month earlier.

"Demands in Europe and the US are recovering with their stronger economic performance, which helps China's trade to improve," Lu said. "But the biggest reason for the sharp change remains the low comparative base."

In July last year, China's trade grew at the slowest pace in 11 years on a monthly basis, Lu said.

China's economy has been stuck in a weak recovery, with the growth easing to 7.5 percent in the second quarter from 7.7 percent in the first three months. Besides, the particularly hot weather in this July also affected the vitality of business activities, analysts said.

"This summer is not quiet for China," said Zhu Haibin, chief economist at J.P.Morgan. "The interbank liquidity stress in June still generates market concerns on China's financial risks, and meantime economic data remain on the soft side."

Zhu said policy uncertainty remains, but situations seem to start changing.

The authorities attempted last month to restore market confidence via clarifications of economic policies. Premier Li Keqiang reiterated that this year's growth target at 7.5 percent and clarified the growth floor at 7 percent.

In addition, some modest reform measures, such as tax reduction for small firms and more investment in infrastructure construction, were announced to combine targets of stable growth and economic restructuring.

Lian Ping, chief economist at Bank of Communications, said China's economic performance may stabilize in the second half with the help of these gentle policy easing.

The bank's research team also estimated China's CPI increased 2.8 percent in July. But its projection of trade was much more modest compared with Lu's. BoCom said exports may have risen 3 percent and imports upped 1.9 percent.

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