(Bloomberg) — Major economic data this week may indicate that China’s recovery is doing much better than it actually is.
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Official figures on Tuesday are expected to show rapid year-on-year growth in industrial production and retail sales for the month of April, with the two major data sets likely to accelerate from March. The pace of investment in fixed assets is also expected to increase during the first four months of 2023.
The numbers come with a major caveat: They all compare to an unusual period of time in China last year, when the manufacturing and finance hub in Shanghai was closed due to the spread of Covid cases, and restrictions on movement slowed or halted activity elsewhere.
This means that while economists usually pay close attention to annual data in China, this time they may look at monthly comparisons as a better indicator.
The latest figures provided evidence that the momentum of the economy – hitherto driven by the release of pent-up demand – is slowing. Consumer prices in China barely grew last month, while new borrowing eased and housing market sales began to fade. Trade data for April showed imports falling and export growth also slowing.
The unbalanced recovery has raised questions about the extent to which the world’s second-largest economy can boost global growth this year, while other countries were hoping that ending China’s pandemic restrictions would benefit their exports.
What Bloomberg Economics says:
China’s April activity data is likely to provide another example of headline numbers that cannot be taken at face value. We expect a jump in production and retail sales – compared to last year’s terrible numbers, which broke out during the lockdowns in Shanghai.”
—Shang Xu and David Koo, economists. To view the full report, click here
It also fuels the debate over whether the People’s Bank of China will ease monetary policy. Some economists argue that the central bank has room for action this year – including lowering its benchmark policy rate – now that the US Federal Reserve looks likely to hold off on raising interest rates.
Contrary to the consensus, Bloomberg Economics expects the rate cut to come immediately because growth “clearly needs a boost.” Others say that the state should prioritize measures that enhance confidence in businesses and ensure the growth of family income, given the abundance of liquidity now.
Elsewhere, Japan will release inflation and growth figures, the European Commission will publish new quarterly economic forecasts, Mexico’s central bank has an interest rate decision, and data in the US is likely to show further economic weakness.
Click here for what happened last week and below is our summary of what is going to happen in the global economy.
There is a lot more on the agenda than the Chinese data.
In Thailand, GDP data on Monday is likely to show a pickup in growth. This data comes one day after the national elections. A mix of opinion polls before and after the election shows pro-democracy parties leading their efforts to replace the military-backed government that first took power in 2014.
The Philippine central bank may halt its rate hike cycle on Thursday.
India will release trade figures on Monday, while New Zealand and Malaysia will publish on Friday.
Japan will also release its first-quarter GDP figures on Wednesday, likely posting further growth, while inflation is expected to show further acceleration on Friday, adding to the impact of the cost of living.
The US and Canadian economy
The US calendar provides snapshots of consumer demand, the housing market and manufacturing at the start of the second quarter. Government data on Tuesday is expected to show a recovery in retail sales in April, largely supported by strong results at auto dealers.
On the same day, figures released by the Federal Reserve are likely to show a modest increase in factory production in April after the largest decline in three months. Beyond the steady demand for cars, many producers are experiencing poor demand for merchandise.
Among housing-related data for April, home starts and previously owned home sales are expected to decline as the sector continues to struggle for momentum in a rising interest rate environment.
The Fed officials’ calendar is jam-packed, and includes two days of congressional testimony from Vice Chair of Supervision Michael Barr on the current stress on the banking system and the central bank’s response. At the end of the week, Federal Reserve Chairman Jerome Powell joins former Chairman Ben Bernanke for a panel discussion at the Monetary Policy Research Conference.
Other Fed officials scheduled to speak are Board members Philip Jefferson and Michelle Bowman, and regional bank presidents Lori Logan, Loretta Mester and Austin Goolsby.
North, a fresh set of inflation data will inform traders’ bets on the future path of rates, and the Bank of Canada will release its annual review of the financial system amid renewed global banking concerns.
Europe, Middle East and Africa
A week off in some continental European countries with a Thursday holiday will be bookended by two major economic assessments.
On Monday, the European Commission will reveal its quarterly outlook with a fuller view from the February release that includes projected debt and deficits.
Officials said last time that the Eurozone economy will be in better shape than previously expected. They will need to weigh that against weak German data and evidence of growing global headwinds. Their inflation forecasts may also attract interest as price growth shows little sign of slowing.
On Friday, after the market closes, Moody’s Investors Service will say whether the negative outlook for Italy should shift to a downgrade, marking the country’s first junk rating.
Read more: Italy escapes Fitch ruling by paying Meloni ahead of Moody’s
It’s a quieter week for data, with Industrial Production for March on Monday, and second readings for GDP and inflation in subsequent days.
Many ECB officials will be speaking out, just as they increasingly acknowledge that the tightening cycle may not be close to ending. President Christine Lagarde will deliver comments on Friday. Other public attendees include Executive Board members Luis de Guindos and Isabel Schnabel and the heads of central banks from Germany, Ireland and Spain.
Vice President Guindos told Italy’s Il Sole 24 Ore that the ECB is in the “main range” of its rate hike path.
In the UK, where the BoE just raised interest rates and signaled further tightening, wage data on Tuesday will be watched closely. Governor Andrew Bailey and many other officials will appear publicly before lawmakers or at other events.
In Sweden, inflation data for April on Monday will draw attention after the recent hawkish decision by the Riksbank, just as housing market problems hurt economic growth.
Multiple GDP reports are tabulated from across Europe, from Denmark to Slovenia to Poland. Perhaps most interesting is Hungary, which is scheduled to be presented on Tuesday. Its economy likely contracted in the first quarter amid a deep recession, the fastest inflation and the highest interest rates in the European Union.
There are three central bank decisions across the African continent:
The Bank of Zambia is likely to raise its key interest rate on Wednesday for the second time this year to contain double-digit inflation and support its currency, which has been pressured by slow progress in debt restructuring talks.
A temporary slowdown in price growth may give the Central Bank of Egypt room to halt its monetary tightening on Thursday.
On Friday, Angolan policymakers will cut borrowing costs for the third time this year as inflation remains low. Gov. Jose de Lima Masano said last month that if price pressures eased further, “we could potentially finish the year with a base rate of about 15%.” The rate is currently 17%.
Finally, the outcome of the upcoming elections in Türkiye will be of great interest to investors.
On a busy Monday, Focus’s survey of highly rated Brazil, economic activity in Peru and labor market data in Lima kicked off ahead of Colombia’s first-quarter production report. After expanding 11% and 7.5% in 2021 and 2022, economists surveyed by Bloomberg forecast growth of just 1.1% for 2023 and 2.2% for 2024.
The Chilean economy probably expanded for the second consecutive quarter in the three months through March. The Finance Ministry now expects an expansion of 0.3% this year, compared to a previous estimate of a 0.7% decline.
On Tuesday, Uruguay’s central bank may follow a surprise quarter-point rate cut in April with another move lower as a multi-year drought hurts the economy.
In Brazil, a rapid slowdown in inflation and government support to households is likely to keep retail sales brisk in March, while GDP proxy data for the same month is likely to come from February’s near three-year high.
The Banxico meeting is hard to call: after 15 hikes and 725 basis points of tightening over 23 months, there is a real chance the central bank will end up. Will the board members led by Governor Victoria Rodriguez-Sega call it a day at the current 11.25%, or will they go for another quarter-point increase to raise the key rate to 11.5%?
– With assistance from Vince Jull, Sylvia Westall, Andrea Dudek, Nasreen Syria, Gilles Desis, Fran Wang, Robert Jameson, and Laura Dillon Kane.
(Thai election updates in Asia section, ECB in EMEA section)
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