(Bloomberg) — Nomura International (Hong Kong) Ltd. and Bank of America Corp. raised their forecasts for China’s economic growth for this year after data this week showed a strong recovery in the first quarter.
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Nomura now predicts gross domestic product will expand 5.9%, up from an earlier estimate of 5.3%. Bank of America is more bullish, projecting 6.3% for the year, compared with 5.5% previously.
China’s GDP grew at a faster-than-expected 4.5% in the first quarter from a year earlier, official figures showed this week, as the property market rebounded and consumer spending surged. Strong growth in exports in March also helped to lift sentiment.
“China now is in its sweet spot of pent-up consumption demand after the pandemic,” Nomura’s chief China economist Lu Ting wrote in a research note. The breakdown of the GDP data suggests the services sector’s recovery “was above our expectations,” he said.
BofA economists said the rapid expansion in credit will fuel investment growth “more than consumption and lift cyclical momentum in China.”
Lu said he remains cautious about the second half of the year and 2024, adding that the recovery momentum for domestic consumption will likely soften. He cited a “still-elevated household saving rate, a rising youth unemployment rate, payback effects from auto stimulus measures and the auto price war” as factors.
JPMorgan Chase & Co., UBS Group AG, Citigroup Inc. and Societe Generale SA also upgraded their 2023 forecasts after the GDP figures this week. Bloomberg Economics predicts 5.8% growth this year, but said in a report Friday that GDP could expand as much as 6.6% in a more optimistic scenario.
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