Forex: Chinese Labour market conditions tightest since at least 2001 - Nomura

FXstreet.com (Barcelona) - Nomura Strategists Zhiwei Zhang and Wendy Chen note that the Chinese labour market conditions are at the tightest since at least 2001, which they feel suggests that inflationary pressures remain and policy easing is unlikely.

They begin by noting that the ration of job vacancies to applicants rose further to 1.10 in Q1 2013 from 1.08 in Q4 2012, despite the fact that real GDP growth slowed to 7.7% YoY in Q1 from 7.9% in Q4. They note that this is the highest ratio since data were made available in 2001, and has now been above the breakeven point of 1.0 for ten consecutive quarters. They feel that the tight labour market suggests that GDP growth is near its potential, and supports their view that potential GDP growth has slowed to 7-7.5% YoY. They finish by commenting that the tight labour market also reinforces their view that credit growth will fall, as the government focuses more on containing rising financial risks rather than trying to boost short term growth. They write, “We reiterate our view that GDP growth will slow during the remainder of 2013, as policy tightens further.”