(Bloomberg) — China is expected to record rapid economic expansion in the second quarter, although underlying numbers paint a more challenging picture.
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Comparing it to last year, when Shanghai was under a Covid-related lockdown, will make Monday’s gross domestic product data much better than it actually was. GDP likely rose 7.1% for the quarter on an annual basis, compared with 4.5% in the prior period, according to economists polled by Bloomberg.
Compared to the first quarter of 2023, however, it probably only increased by 0.8%. Monthly data for industrial production, retail sales and fixed investment – all scheduled for Monday – are expected to show a marked slowdown in June. Retail sales growth, in particular, likely fell to 3.3% from 12.7% in May.
Economists are focusing on these latest numbers to get a fuller picture of China’s recovery. So far, the signs have been disappointing: manufacturing activity is contracting, deflation is looming, export demand is down and recent holiday spending has been subdued.
Speculation has grown that the People’s Bank of China will add more stimulus after a surprise interest rate cut in June. Officials signaled on Friday that additional support could be forthcoming, although it is likely to be limited in scope and targeted at specific sectors, such as the property market and private businesses.
All economists polled by Bloomberg predict the PBOC will keep its one-year contract lending rate unchanged at 2.65% on Monday, while some expect a small net injection of funds.
What Bloomberg Economics says:
“The PBOC wants to avoid adding too much stimulus too quickly. He learned from experience that bursts of monetary easing can cause unwanted side effects.
—For a full analysis from Bloomberg Economics’ team of Asian economists, click here
Elsewhere, a key UK inflation figure will help signal the scale of the next rate move, retail sales take center stage in the US and Turkey’s central bank decisions to South Africa could be dramatic.
Click here to see what happened last week and below is our summary of what is happening in the global economy.
United States and Canada
Tuesday’s retail sales numbers highlight a busy week of US indicators ahead of the July 25-26 Federal Reserve policy meeting. Economists forecast a healthy 0.5% gain for June sales, which would add to the evidence of a resilient consumer.
Supported by steady growth in employment and worker compensation, household demand – while slowing – has supported the economy. A sustained rise would help limit recession risks in the wake of the Fed’s aggressive rate hike campaign.
Data on residential construction, home sales and builder sentiment will offer fresh reading on a housing sector that has begun to stabilize.
Economists expect housing starts to retreat in June after the biggest gain since 2016. Contract signings to buy existing homes are expected to decline as rising mortgage rates continue to impact the housing market. resale.
On Tuesday, a Fed report is expected to show little change in manufacturing output from last month, pointing to a sluggish manufacturing sector.
The highlight in Canada will be the inflation data for June after the headline figure slowed to 3.4% in May. The focus will be on two measures tracked by the Bank of Canada: policy and median rates, and services inflation. Their persistence above target contributed to Wednesday’s decision to raise rates to 5%.
New data on Canadian existing home purchases and retail sales will show whether consumption remains strong despite rising borrowing costs.
Asia
While China will get the most attention, there’s a lot more going on in Asia.
A group of 20 finance ministers and central bank governors meet in Gandhinagar, India, where they are likely to discuss the state of the global economy and debt relief amid divisions over the invasion of Ukraine by Russia.
Speaking in Gandhinagar ahead of the rally, US Treasury Secretary Janet Yellen said she wanted to build on recent improvements in US-China relations.
The head of the Bank of Thailand is expected to give a briefing on Wednesday after signaling earlier in the month that policy tightening would continue.
In New Zealand, where the central bank on Tuesday kept rates unchanged for the first time in nearly two years, quarterly inflation data is expected to show a further slowdown.
Australia’s labor market has so far remained resilient to rate hikes, but any weakening in jobs numbers on Thursday could signal the end of the policy tightening cycle.
Trade figures from Singapore, Indonesia, Japan and Malaysia will be closely watched to gauge the strength of global demand, although South Korea’s preliminary figures for July will offer the most up-to-date gauge.
Japan’s national inflation figures, also due out on Friday, could impact expectations for the Bank of Japan’s meeting the following week amid speculation over possible policy adjustments.
Europe, Middle East, Africa
UK inflation will be the highlight of the data after a recent earnings report suggested price pressures are taking root.
While Bank of England Governor Andrew Bailey predicted that price growth will slow “significantly” in the second half of the year, following the path seen in the United States and parts of Europe, Wednesday’s report may show only limited progress. Any sign of stubborn underlying inflation will cement expectations of another aggressive half-point rate hike to match the previous move in June.
UK retail sales and deficit figures due on Friday will also inform investors about consumer resilience and the state of public finances.
In the Eurozone, the final take on inflation for June will be released on Wednesday, followed on the same day by consumer confidence across the region.
European Central Bank chief Christine Lagarde is among policymakers speaking Monday at a conference on the economies of central, eastern and southeastern Europe.
Few other public remarks are expected before a blackout period takes effect Thursday ahead of the July 27 ruling, where a quarter-point rate hike was all but promised.
Looking east, Bulgaria could appoint central bank governor Dimitar Radev for another six-year term and also begin the process of appointing two deputy governors, a move needed for the country to push ahead with its bid. to the euro area.
Three major central bank decisions are expected elsewhere in the region:
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The Bank of Russia could end its longest rate break in more than seven years on Friday, with the possibility of higher borrowing costs to fight inflation.
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On Thursday, Turkey’s central bank makes its second decision since President Recep Tayyip Erdogan won re-election in May. After rising 650 basis points last month, traders will be watching to see if the bank makes a similar move to counter inflation, which is still hovering near 40%.
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On the same day, the decision of the Reserve Bank of South Africa could prove difficult to determine whether the authorities suspend the steepest phase of monetary tightening since 2006 or raise rates by 25 basis points. Market prices show traders betting on a 40% chance of such a rise.
Data from South Africa on Wednesday will likely show that inflation in June returned to the Reserve Bank’s target range of 3% to 6% for the first time since April 2022.
Latin America
There are headwinds, of course, but the Brazilian central bank’s analyst survey and Brazil’s GDP proxy data released on Monday should once again give reason for optimism about Europe’s biggest economy. ‘Latin America.
Inflation expectations have fallen for eight straight weeks, growth forecasts have risen for 12 straight weeks and monthly output data has exceeded analysts’ estimates for four straight months.
Colombia’s May GDP rough numbers on Tuesday could show a second straight contraction as the economy cools after a torrid 2022. Economists see growth slowing to 1.5% this year from 7.5%.
A light week in Mexico will see reports on international reserves, retail sales and the Banamex survey of economists.
Inflation just above target could keep Paraguay’s central bank on hold at 8.5% for a 10th consecutive month.
Activity in Argentina had been hot and cold before a sharp drop in April. Too many challenges — triple-digit inflation, a growing recession, a shortage of dollars and investor concern about a possible run on the financial system in the middle of an election cycle — argue for another negative impression for May.
Argentina is expected to enter a recession this year; economists polled by Bloomberg see the economy shrinking by more than 3%.
–With help from Zoe Schneeweiss, Michael Winfrey, Robert Jameson, Paul Jackson, Laura Dhillon Kane, Jill Disis, Monique Vanek, Paul Wallace and Vince Golle.
(Updates with G-20 Asia Section)
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