Debates about the usefulness of China's gross domestic product data as a guide to Beijing's likely policy response to slowing growth become a little clearer, thanks to Goldman Sachs. The bank's current activity indicator provides an alternative monthly measure of growth including greater representation from non-manufacturing areas of the economy. The updated series, scaled to GDP growth for easy comparison, suggests growth decelerating to a 6 per cent pace as at February. "We expect official real GDP growth to be consistent with a sequential growth rate of only 5 per cent annualised in [the first quarter], when it is released next month," the bank wrote in a note to clients. Crucially, when the indicator signals growth dropping below Beijing's target GDP rate, policy levers tend to be pulled. "There was generally inflection in financial conditions around the time of the disappointment in growth - and this was always the case when the disappointment lasted more than a month or two." The indicator suggests disappointment has been building for more than six months.
