Strong Growth and Inflation Today

Growth momcnturn re- mained pretty strong in April， as Table i shows， according to the data released by China's National Bu- reau of Statistics (NBS). CPI infla- tion accelerated to 2.8% year-on- year (y/y)， from 2.4% in March， but seems to have stabilised on a m/m basis. Prices continue to rise in y/y terms in food， industrial products and services. Retail sales growth accelerated in nominal terms to 18.5% y/y (from 18.1% prior)， while sales growth in real terms are likely to have held steady at around 15% y/y. Growth in industrial produc- tion (17.8％ y/y) and fixed asset in- vestment (25.5%) was still strong， although both decelerated. Policy tightening measures introduced in recent months will help to rein in growth in H2-2010. Nonethe- less， today's data suggests that we might see further tightening in the short term， even if policy measures so far， especially those related to the real estate sector， mean that by Q3 growth momentum should be clearly slowing.