Citi increased full-year forecasts for China’s economy

After China reported a 4.6% growth in its gross domestic product on Tuesday, JPMorgan and Citi have increased their projections of the nation’s full-year economic output.

JPMorgan raised its 2023 growth outlook to 6.42% from a previous forecast of 6.3%, saying the latest quarterly report signaled further gains.

Citi also raised its forecast above consensus to 6.12% from its previous forecast of 5.73%, saying China’s economy is well on its way to a post-Covid improvement, led by consumption and services.

The firm added that stronger-than-expected growth in the first quarter indicated further upside.

Citi analysts noted that while services outpaced consumption-led growth in the first quarter, they are cautious in their forecasts.

UBS also increased its forecast for the year to 5.42% from 5.72%, given a stronger-than-expected advance in the first months of 2023, driven by a brisk recovery in both consumption and property.

Politburo meeting in focus

Citi said the upcoming Politburo meeting could allow policymakers to regain confidence in the private sector.

Citi also said investors should keep an eye on policies related to structural reform.

Morgan Stanley hinted in a note on Tuesday that it might take similar steps, saying the firm saw upside risk to its full-year growth forecast of 5.7%.

The average quarterly growth of 4.82% for the rest of the year may be overstated due to low inflation in China.

Consumer inflation in China hit an 18-month low earlier this month.

The recovery is two-speed, with services outpacing goods and consumption outpacing investment and exports.

March UK inflation was higher than forecast.

Crude oil was able to return to its former level after slipping to a 15-month minimum in the middle of March, which was in response to the instability within the finance industry. A surprise announcement by OPEC+ to cut production and curb Iraqi flows led to some gains.

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