Real GDP growth picked up to 6.9% YoY, while nominal GDP growth accelerated notably to 11.8% YoY in 1Q17. Real GDP growth was in line with our expectation but higher than the market consensus of 6.8%. On a sequential seasonally-adjusted basis, GDP growth held up at 6.5-7% QoQ annualized, compared with 6.5% QoQ in 4Q16. More importantly, nominal GDP growth picked up visibly to 11.8% YoY in 1Q17 from 9.6% YoY in 4Q16, with GDP deflator rising by 4.6% YoY, up from 2.6% YoY in 4Q16. Higher nominal growth indicated a significant recovery in industrial profit growth in 1Q17. GDP by industry breakdown showed that the secondary industry nominal growth accelerated notably to 14.2% YoY in 1Q (compared to 9.2% YoY in 4Q16), indicating improved industrial enterprise profitability. On the other hand, tertiary industry growth remained stable in nominal terms while edged down in real terms. High-frequency data indicate that domestic demand growth accelerated and export growth recovered, while trade surplus narrowed visibly in 1Q.

Headline industrial production (IP) growth surged to 7.6% YoY in March from 6.3% YoY in January-February, notably higher than the consensus of 6.3% YoY. IP growth picked up strongly despite a higher base in March 2016, indicating the continued recovery in secondary industry. On a sequential, seasonally adjusted basis, March IP growth also accelerated to 0.83% MoM. Sector wise, production growth of machinery, computers, utilities, and metal processing industries accelerated most notably – electricity and ferrous metal processing production growth jumped to 7.2% YoY and -0.2% YoY in March, from 6.3% YoY and -9.1% YoY in January-February, respectively; meanwhile, general equipment production growth held up at 10.6% YoY. On the other hand, automobile production growth decelerated to 12.3% YoY from 17% YoY in January-February. It is also worth noting that the production volume growth of industrial robots soared to 78.2% YoY in March from 29.9% YoY in January-February, indicating industrial upgrade underway.

Nominal fixed asset investment (FAI) growth also accelerated to 9.4% YoY in March from 8.9% YoY in January-February. Meanwhile, March year-to-date FAI growth rose to 9.2% YoY, higher than the market consensus of 8.8% YoY. The leading indicators of FAI picked up in March- FAIproject new starts growth rose to -5.6% YoY in March from -8.3% YoY in January-February, andFAI project under construction growth remained strong at 20.4% YoY in March, compared to 22% YoY in January-February. Sector wise:

Manufacturing investment growth recovered to 6.9% YoY in March from 4.3% YoY in January-February. Looking forward, manufacturing investment growth may continue to be on the mend in 2017 on the back of notably improved industrial profitability.

Property investment growth accelerated to 9.3% YoY in March from to 8.9% YoY in January-February. Property new start growth rose to 13.1% YoY in March from 10.4% YoY in January-February. Meanwhile, property development source of funding growth also picked up notably to 20.6% YoY in March from 7% YoY in January-February.

Infrastructure investment growth remained elevated at 16.8% YoY in March, compared to 21.3% YoY in January-February. Infrastructure investment growth edged down mainly due to the higher base in March 2016.

Meanwhile, private sector investment growth picked up further to 8.5% YoY in March from 6.7% in January-February.

Nominal retail sales growth recovered visibly to 10.9% YoY in March from 9.5% YoY in January-February, much higher than the market consensus of 9.7%.

1Q and March economic data indicated strong aggregate demand growth, especially that of domestic demand. Meanwhile, higher nominal growth points to further improvement in corporate profitability and cash flow, which creates a favorable macro environment for financial deleveraging and structural reforms. In our view, domestic demand growth will likely hold up at a robust level in the near term, led by strong investment demand and recovery in discretionary consumption growth. On the other hand, external demand may continue to recover as indicated by the uptrend in PMI of major economies. Looking forward, we would continue to monitor the change in overall social financing growth as a leading indicator for the potential impact of monetary policy tapering on the cyclical momentum.