China Beige Book Sees Strong First Quarter Giving Way to `Lull'

(Bloomberg) -- The world’s second-largest economy held up in the first quarter, with "strikingly consistent" performances across regions, but may be losing steam, according to the China Beige Book.

Manufacturing and services led with strong sales while there was some slowing in property and commodities, two engines of the old economy most at risk of overheating, CBB president Leland Miller and chief economist Derek Scissors said in a report.

Job growth remains near a historic high in the private survey by CBB International, which collects anecdotal accounts similar to those in the Federal Reserve’s Beige Book. “Hiring has stopped accelerating but the employment situation is fine,” according to CBB’s report.

“It would require a lot of contortion to see a poor economy in the first quarter,” Miller and Scissors wrote. “The tougher question is what’s going to drive growth a year from now,” they said, adding that two years of surprising manufacturing performance won’t endure and services likely will weaken after excellent first-quarter sales. “Next stop for the economy as a whole: a lull.”

Policy makers at the National People’s Congress this month set a 2018 growth goal of around 6.5 percent that omitted last year’s aim for a faster pace if possible. Economists surveyed by Bloomberg forecast the same pace, which would follow a 6.9 percent expansion last year, the first annual pickup since 2010.

China Beige Book said in December that data offer a “warning for 2018” now that leaders are less motivated to prop up growth after leadership changes in October. Fourth-quarter results already show some signs of a transition to slower growth, CBB said.

©2018 Bloomberg L.P.