China’s working age population in 2012 is a shocker

Growth falls for the first time in 20 years.

Growth of China's working-age population (aged15-59) turned negative in 2012 (-0.6% y-o-y) for the first time in over two decades, according to the National Bureau of Statistics. In a report by Nomura, negative growth of this demographic was generally not expected so soon (according to the UN, China‟s working-age population was estimated to peak in 2015).

Here's more from Nomura:

The fall in working-age population is consistent with our view that the labour market has turned structurally tightand that potential GDP growth has slowed to 7.0-7.5%. This also helps reinforce our view that CPI inflation should rise through 2013, to 4.4% y-o-y in H2 as GDP growth rises to 8.1% in H1 and the output gap widens.

As inflation rises and shadow banking risks increase, we expect credit growth to fall in H1 and the central bank to hike interest rates twice in H2. We are therefore cautious on the growth outlook and expect it to slow to 7.3% y-o-y in H2 from 8.1% in H1.