Our guide to Chinese monthly data What the numbers are, what they mean, and the outlook going forward.

Investment and exports led April recovery while consumption missed Growth recovery continued in April, with exports, manufacturing capex and property investment leading the strength. In particular, manufacturing capex surprised on the upside, with its level 7% stronger than April 2019. Export growth picked up further to 32%y/y in light of ongoing global recovery, thanks to rebounding general consumer goods and resilient electronic and industrial goods. Property sales and investment grew strongly, especially the latter, thanks to resilient market sentiment. In contrast, retail sales missed expectation and narrowed its gain vs 2019 level to 8.9%, partly a payback of previous strong reading in March (see more).

Inflation pressure on rise, credit growth to slow further April headline PPI inflation jumped by 2.4ppt to 6.8%y/y. Non-food CPI inflation rose partly on stronger touring & outgoing prices and a low base, bringing headline CPI higher to 0.9%y/y. We expect the sequential PPI growth to fade in the coming months, while its y/y growth may peak around May-Jun at >7%y/y and stay elevated in H2. CPI may rise gradually to around 2% in Q3 and >3% in Q4 (see more). April credit growth slid to 11.6%y/y and credit impulse turned to a first negative reading of -0.7% of GDP since Sep 2019. We don’t' think the recent inflation pressure will trigger any aggressive policy tightening in the rest of 2021. We continue to expect credit growth to slow to 11% by end-2021, while it may stabilize in Q4 with credit impulse bottoming in Oct.

Faster sequential growth and continued policy normalization in Q2 We still expect sequential growth momentum in May-June to improve, bringing Q2 GDP growth to 7-8% q/q saar (8.3%y/y) from 2% in Q1. The growth momentum will likely be supported by ongoing consumption improvement, solid external demand especially from DM, and sustained manufacturing capex recovery. Property activities may stay resilient for a while longer thanks to strong market sentiment, while we see increasing challenges from continued property credit tightening. Meanwhile, as highlighted in recent Politburo meeting, the government reiterated no sharp policy turn while focusing more on controlling risk and leverage. We continue to expect gradual policy exit from the previous monetary and fiscal stimulus. Policies and rules on property lending, LGFV financing, internet finance and corporate monopolies are being tightened. Nonetheless, we see limited negative impact on growth, thanks to the expected notable recovery of corporate earnings and household income (see more).