Beyond the Headlines: Five Things to Watch in China's GDP Report

  • Economists see first-quarter expansion slowing to a 6.7% pace
  • Manufacturing, investment and consumption reports also due

Workers set up a bamboo scaffolding at a construction site in Shanghai on April 13, 2016. China's growth slowed further in the first three months of this year, economists polled by AFP forecast, even as authorities step up policy support for the world's second-largest economy. / AFP / JOHANNES EISELE (Photo credit should read JOHANNES EISELE/AFP/Getty Images)

Photographer: Johannes Eisele/AFP via Getty Images

A rebound in exports, firmer inflation and housing strength suggest China’s economy may have performed better than many had expected in the first quarter.

The first quarter gross domestic product report due Friday at 10 a.m. Beijing time, or 10 p.m. Thursday on Wall Street, will show the world’s second-largest economy expanded 6.7 percent from a year earlier, according to a Bloomberg survey of economists as of Thursday morning. Premier Li Keqiang said last week growth will be "better than expected" as indicators improved.

Other reports scheduled for release will provide gauges for manufacturing, investment, consumption and employment. Economists forecast industrial production increased 5.9 percent in March from a year earlier, while fixed-asset investment is forecast to pick up to 10.4 percent in the first three months of the year.

Services have been leading growth, but how much that can offset sluggishness in the old industrial drivers still isn’t settled, nor is the robustness of the improving economic data. Li and other top officials are still pledging to keep growth above 6.5 percent this year.

Here’s what to look for beyond the headline numbers:

Growth Drivers

Financial services, the leading growth driver of the economy during the stock market surge early last year, probably won’t offer much of a boost this year. That makes the new drivers even more crucial.

The statistics bureau tracks three main sectors, which broadly correspond to agriculture, manufacturing and services, and will update breakdowns for growth in all three Friday. The tertiary sector, as services is known, accounted for more than 50 percent of GDP last year for the first time ever.

Real Estate

Key housing data will be included in the fixed-asset investment report due at the same time as GDP. One spot to watch for sustained strength is real estate investment, which rose 3 percent from a year earlier in the first two months, up from 1 percent in 2015. Housing starts and capital expenditures will also show how property developers are doing.

"The uptick in construction has helped overall growth in China to bottom out in early 2016," Louis Kuijs, chief Asia economist at Oxford Economics in Hong Kong, wrote in a note this week. "However, in our view the uptick in construction is premature and we are skeptical whether it can be sustained."

Factory Figures

The factory floor is another essential place to take the pulse of China’s economy. The official manufacturing purchasing managers index unexpectedly jumped back to a level signaling expansion last month.

Electricity output and other breakouts of March industrial production will show a sharper picture of manufacturing Friday. Chemical production may see further deceleration. Auto production will show how the middle class is responding to last year’s vehicle tax cuts.

Labor Market

One idiosyncrasy of the National Bureau of Statistics is that while it publishes thick books full of minutia, it doesn’t release what’s generally the most important single data point for monetary policy and the economic outlook: A credible unemployment rate that’s released to a fixed timetable.

Instead, the NBS announces a survey-based jobless rate at irregular intervals, and the press briefing that accompanies Friday’s GDP release would be a likely time for new data. The last reading was announced by local media in March was 5.1 percent. Another index that may be updated is the job vacancy to job seeker ratio, a gauge of labor demand.

Nominal Growth

Pull out your calculator to see the real dollar-value that China’s economy expanded last quarter. A weaker yuan and slowing growth mean it added less in dollar terms than the U.S. for the first time in almost a decade last year. Will the gap between the world’s biggest and the second-biggest economy expand further this year?

Nominal GDP, not adjusted for price changes, is released Friday, but a nominal growth rate is not -- it has to be calculated by comparing one quarter’s nominal GDP from a year earlier. Given that corporate profits, government tax revenue and other real-world activities are all counted in nominal terms, working out how the real economy is faring requires a look at these un-adjusted numbers.

— With assistance by Xiaoqing Pi

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