Priya Aditi
China’s economy is in trouble :China will likely report accelerated economic growth for the second quarter, but underlying data will reveal a more difficult picture.
The comparison with last year, when Shanghai was experiencing a Covid-related lockdown, will make Monday’s gross domestic product figures appear significantly higher than they actually were. According to economists polled by Bloomberg, the GDP likely increased 7.1% year-over-year in the third quarter, up from 4.5% in the previous period.
However, compared to the first quarter of 2023, it likely increased by only 0.8%. June data for industrial production, retail sales, and fixed investment, all of which are scheduled for release on Monday, are anticipated to indicate a marked decline. Particularly, retail sales growth likely declined to 3.3% from 12.7% in May.
The continuing saga of China’s economic calamity
For a more complete picture of China’s economic recovery, economists are focusing on more recent data. The signs thus far have been discouraging: manufacturing activity is contracting, deflation is on the horizon, export demand is declining, and recent holiday spending was subdued.
After an unexpected reduction in interest rates in June, speculation has increased that the People’s Bank of China will add more stimulus. Officials indicated on Friday that additional assistance may be forthcoming, though it is likely to be limited in scope and targeted towards specific sectors, such as the real estate market and private enterprises.
All economists surveyed by Bloomberg predict that the PBOC will maintain the same 2.65% interest rate on its one-year policy loans on Monday, while some anticipate a modest net injection of funds.
What Bloomberg Economics Says: “The PBOC desires to avoid introducing too much stimulus too quickly.” It has learned through experience that rapid monetary easing can have unintended consequences.”
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Elsewhere, a crucial UK inflation number will help indicate the magnitude of the next rate move, retail sales will be the focus of attention in the United States, and central-bank decisions from Turkey to South Africa may produce drama.
