China will release its third quarter GDP next week amid its usual avalanche of monthly data, and we forecast growth of around 4.1% year-on-year. China’s macroeconomic data for the third quarter has been very weak until September, when there were signs of slight stabilization. A year-on-year growth of 4.1% would keep the seasonally adjusted quarter-on-quarter rate at approximately the same pace as in the second quarter of the year according to our calculations, so it is a relatively generous forecast given the context (although it is slightly lower than the median estimate of the 4.5%).
The People’s Bank of China (PBoC) is unlikely to reduce the 1-year MLF rate now that there are some signs that the economy is stabilizing, especially as the CNY remains under increasingly weak pressure. For retail sales, we should see slightly higher growth, partly due to favorable base effects and holiday spending. We expect retail sales growth to be 5.0% year-on-year. Industrial production growth could also pick up slightly, in line with recent PMI numbers.