GDP growth in the third quarter picked up to 7.8% yoy from 7.5% the previous quarter. China’s economy benefitted from some policy stimulus and high credit growth rates reported at the beginning of the year. Indeed, financial conditions remain ample in China. Last week Thursday for the first time since June, the People’s Bank of China decided to suspend reverse repo operations and stopped injecting liquidity. The central bank in a statement that accompanied this measure noted that it is concerned about rapid credit growth. We think that going forward the monetary policy stance will be more neutral. Meanwhile, September’s string of data which includes industrial production, retail sales and fixed investment lost some momentum, after several months of strength. We think that GDP will slightly moderate in the fourth quarter as suggested by the somewhat weaker data in September. In 2014, we expect economic activity to pick up on the back of a stronger global economy.
India, Singapore & Thailand
India’s wholesale price inflation (WPI) was 6.5% yoy in September up from 6.1% yoy the previous month. Food inflation, particularly onion prices were responsible for the upward pressure in prices. Meanwhile, September’s CPI increased to 9.8% yoy from 9.5% yoy on the back of higher vegetable prices. This is in line with the rise in WPI. Inflation remains above the comfort level of the authorities. This explains the unexpected hike in the repo rate some weeks ago. Although the central bank has shown its commitment to fighting inflation, we expect the repo rate to remain at 7.5% throughout the year as authorities try to balance inflation and economic growth. Meanwhile, last week Thailand and Singapore left their policy rates on hold. In the case of Thailand somewhat softer growth and muted inflation suggested that interest rate normalization would only resume in 2014. Finally, in Singapore, GDP growth remains strong as indicated in the in the third quarter advanced report, which came in at 5.1% yoy compared to 4.2% in the previous quarter. We expect Singapore to maintain its policy rate on hold this year.