Considering the low base in 1Q14, we expect YoY GDP growth in 1Q15 to be 7.4%, up 0.1ppt compared with 4Q14. Moreover, improved external demand will further contribute to the stabilization of China’s economy (US economic growth was weak in 1Q14 but is expected to be strong in 1Q15). But before 1Q15 data is released, there may be ups and downs in data of January~February and March due to distortions caused by the Chinese New Year, complicating the assessment of true economic trends. The growth data may be relatively strong in January~February and relatively weak in March, which should not be over-interpreted.

MoM seasonally-adjusted growth data will be also subject to distortions caused by the Chinese New Year; the simplest and most intuitive way to assess the impact of the holiday is to compare with similar years in the past. The Chinese New Year falls in the second half of February this year. Based on the experience of similar years in the past, we think the Chinese New Year will cause a positive distortion to January~February data and a negative distortion to March data. The holiday will distort the number of effective working days: there will be 34 effective working days in January~February this year (vs. 32 a year earlier) and 18 effective working days in March (vs. 21 a year earlier).

We expect YoY industrial output growth to rebound to 8.4% in January~February, before dropping sharply to 7% in March. The late Chinese New Year causes the Lantern Festival to fall in March. This will negatively affect industrial production in March as many migrant workers may not come back to work until after the Lantern Festival. For 1Q15 as a whole, we expect industrial output growth to be 7.7%, up slightly compared with the 7.6% in 4Q14.

We expect total trade surplus in 1Q15 may surge 200~300% YoY thanks to a low base effect and the oil price plunge. Meanwhile, export growth and trade surplus may hit their 2015 lows in March due to distortions caused by the Chinese New Year; and CPI inflation may drop below 1% in January, rebound in February and rise slightly in March. M2 growth and loan growth may not be much impacted by the Chinese New Year and they are mainly subject to the central bank’s monetary policy. The impact of the Chinese New Year on money supply is mainly felt by M0.