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Forex Flash: Chinese Industrial Production may surprise - Nomura

FXstreet.com (Barcelona) - Nomura economists Zhiwei Zhang and Wendy Chen believe that Chinese Industrial production growth may surprise markets, but the rebound likely reflects working day distortions and not a real economic recovery.

The expect industrial production (IP) growth to rebound to 10.5% y-o-y in April from 8.9% in March (Consensus 9.4%), as April this year has two more working days than last year and the data is scheduled to be released on Monday, 13 May. Their estimate is based on daily electricity production data released by the Government. They estimate monthly electricity production rose by 7.6% y-o-y in April from 2.1% in March, which implies IP growth of -1.5% m-o-m in April, lower than historical average of 0.2%. They feel that if these estimates are correct, then the year on year rebound would reflect a working day distortion and not a real improvement in economic momentum. They write, “Given the unusually strong distortions in working days (-8.7% y-o-y in March and 10.5% in April), we suggest investors view headline activity indicators with caution and instead focus on month-on-month, seasonally-adjusted growth and the PMIs, which are not affected by working days.”

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